Question 1

What is the supply-side cause of instability according to the mainstream view?

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Question 2

Discuss the Federal Reserve's policy of inﬂation targeting.

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Question 3

According to the monetarists, what is the main cause of macroeconomic instability?

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Question 4

(Last Word) Discuss the use of prediction markets for adjusting monetary policy.

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Question 5

Explain the mainstream economists' justiﬁcation for the use of discretionary ﬁscal and monetary
policy and their criticisms of policy rules.

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Question 6

How do theories of mainstream macroeconomics and monetarism differ in relation to monetary
policy?

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Question 7

Does velocity change in response to changes in the money supply according to monetarists?

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Question 8

How can paying workers an above-market wage result in greater eﬃciency? What are the
implications for the ﬂexibility of wages?

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Question 9

List the four different views of the causes of macroeconomic instability in the economy.

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Question 10

Describe the mainstream view of self-correction in the economy.

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Question 11

What are "coordination failures," and why are they important for interpreting the macro economy?

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Question 12

How do new classical economists view the importance of policy rules and discretion in
macroeconomic policy?

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Question 13

Deﬁne rational expectations theory.

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Question 14

What have been the changes or modiﬁcations in thinking about monetary rules in recent decades?

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Question 15

Deﬁne real-business-cycle theory.

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Question 16

What rationale does rational expectations theory provide for the ineffectiveness of discretionary
policies?

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Question 17

Explain the new classical view of self-correction in the economy.

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Question 18

Deﬁne the velocity of money. Explain the monetarist view with regard to the stability of velocity.

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Question 19

Explain the equation of exchange.

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Quiz 19: Current Issues in Macro Theory and Policy