Economics 301 - Final Review Questions

 

  1. Compare and contrast the exogenous and endogenous views of the money supply process (in words and graphs).  Incorporate the endogenous money supply into the Keynesian analysis of the investment-saving relationship.  What are the institutional mechanisms by which banks can extends their lending capacity?

 

  1. Outline KEMP and KAIMP (words and graphs).  What are the limits to KEMP and KAIMP?

 

  1. Keynes writes that The General Theory is relevant not only for unemployment but also inequalities in wealth and income distribution.  Explain his reasoning.

 

  1. Outline the direct and indirect real balance effects and their counter-arguments.

 

  1. “Low interest rates can result in higher Savings.” Explain.

 

  1. Derive a downward sloping aggregate demand curve by incorporating real balance effects into the Keynesian Cross (45 degree line) diagram.

 

  1. Can Keynesian economics explain stagflation?  Use both the Phillips curve and AS-AD analysis to show stagflation.

 

  1. “The Keynes effect is subject to the same limits as expansionary monetary policy.” Explain.

 

  1. Outline the special properties of money (zero or near-zero elasticities of production and substitution) as discussed in chapter 17 of the GT.

 

  1. Define the quantity equation (individual variables and both sides of the equation).  Outline the monetarist (neoclassical) interpretation and the Keynesian interpretation of the equation and the implications for fiscal and monetary policies.

 

  1. Outline the deficit hawk, deficit dove, and functional finance approaches to government budgets and the national debt.

 

  1. Compare and contrast the simple Keynesian model and the Alternative Effective Demand and Employment Model.

 

  1. Outline and thoroughly explain Minsky’s Financial Instability Hypothesis.