Macro Test

Macro Test - Chapter 1 2. What is a business cycle? How...

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Chapter 1 2. What is a business cycle? How does the unemployment rate behave over the course of a business cycle? Does the unemployment rate ever reach zero? 2. The business cycle refers to the short-run movements (expansions and recessions) of economic activity. The unemployment rate rises in recessions and declines in expansions. The unemployment rate never reaches zero, even at the peak of an expansion. 4. Historically, when has the Federal government been most likely to run budget deficits? What has been the recent experience? 4. The budget deficit is the annual excess of government spending over tax collections. The U.S. federal government has been most likely to run deficits during wars. From the early 1980s to the mid-1990s, deficits were very large, even without a major war. The U.S. government ran surpluses for several years, from 1998 to 2001. 5. Define trade deficit and trade surplus. In recent years, has the U.S. economy had trade deficits or trade surpluses? What was the U.S. experience from 1900 to 1970? 5. The trade deficit is the amount by which imports exceed exports; the trade surplus is the amount by which exports exceed imports, so it is the negative of the trade deficit. In recent years the United States has had huge trade deficits. But from 1900 to 1970, the United States mostly had trade surpluses. 6. List the principal professional activities of macroeconomists. What role does macroeconomic research play in each of these activities? 6. Macroeconomists engage in forecasting, macroeconomic analysis, macroeconomic research, and data development. Macroeconomic research can be useful in investigating forecasting models to improve forecasts, in providing more information on how the economy works to help macroeconomic analysts, and in telling data developers what types of data should be collected. Research provides the basis (results and ideas) for forecasting, analysis, and data development. 5. In 2002, President George W. Bush imposed tariffs on certain types of imported steel. He argued that foreign steel producers were dumping their steel on the U.S. market at low prices. The foreign steel producers were able to sell steel cheaply because they received subsidies from their governments. The Bush administration argued that the influx of steel was disrupting the U.S. economy, harming the domestic steel industry, and causing unemployment among U.S. steel workers. What might a classical economist say in response to these claims? Would a
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Keynesian economist be more or less sympathetic to the imposition of tariffs? Why? 5.A classical economist might argue that the economy would work more efficiently without the government trying to influence trade. The imposition of tariffs increases trade barriers, interfering with the invisible hand. The tariffs simply protect an industry that is failing to operate efficiently and is not competitive internationally. A Keynesian economist might be more sympathetic to concerns about the steel
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Macro Test - Chapter 1 2. What is a business cycle? How...

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