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True, False or Uncertain (Macroeconomics)

 
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Freddie Chatt
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PostPosted: Thu Feb 24, 2011 9:28 pm    Post subject: True, False or Uncertain (Macroeconomics) Reply with quote

Hey Guys

I have some true, false or uncertain questions


1. If the government runs a budget deficit and the private sector invests more than it saves there must be a balance of payments surplus.
2. An increase in disposable income increases the average propensity to save.
3. In a Keynesian economy with proportional taxes, if the rate of indirect tax is increased and the rate of direct tax is decreased by the same amount there will be no effect on national income.
4. The larger is the marginal propensity to consume the steeper is the IS curve.
5. An increase in the price level shifts the LM curve to the left.
6. In a fixed price IS/LM model with lump sum direct tax, the balanced budget multiplier is less than one.
7. If the non-bank public decides to hold a higher ratio of cash to deposits the interest rate will fall.
8. In an IS/LM economy an increase in government expenditure increases the price of bonds.
9. In a classical economy an increase in the money supply has no effect on the interest rate.
10. If unemployment exceeds vacancies, wage rates must be falling.

Thanks in advance for your help.
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Peter Fennell



Joined: 27 Sep 2007
Posts: 53
Location: London

PostPosted: Sun Feb 27, 2011 11:40 pm    Post subject: Reply with quote

My guess is false or uncertain questions.
Insofar as they seem to be about textbook definitions not about understanding the nature of society, what governs or the establishment of justice and equity for the welfare of humanity.


Last edited by Peter Fennell on Sun Feb 27, 2011 11:54 pm; edited 1 time in total
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Peter Fennell



Joined: 27 Sep 2007
Posts: 53
Location: London

PostPosted: Sun Feb 27, 2011 11:51 pm    Post subject: Reply with quote

Freddie,

Here's one that has been troubling me.
What is in the hearts of a people that determines whether they will protest against oppression and whether they will achieve peaceful transition, brief brutal repression or all-out civil war?
And does it have anything to do with the price of bread?
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Richard Glover



Joined: 29 Sep 2008
Posts: 185
Location: Ealing, London, UK

PostPosted: Mon Feb 28, 2011 8:44 am    Post subject: Reply with quote

Hi Freddie,

Straight answers to your questions are not easy unless "uncertain" or "false" as Peter suggests.

Your first question leaves out too many factors for there to be any meaningful answer. For example, the expansion of bank-created money throws several ordinary economic models out, as they do not acknowledge its occurance. The relation between money and the real economy seems to be widely misunderstood. So for this question, I would respond with "false" as the word "must" implies a line of causation from the stated factors only.

Your second question deals with the common assumption that human beings are effectively a statistical algorithm, rather than living expressions of humanity. We have many aspirations that are not dependent on disposable income, and these may or may not include saving. Also, saving in the Keynesian sense is often tied up with the assumption that source of investment is ultimately savings, whereas over the past few decades the expansion of the money supply indicates that it is obviously swamped by new bank-money being created. So I answer this with "false" again due to the implied line of causation.

Often the phrase "ceteris paribus" is used (all other things being equal) in economic models and analysis. If used either tacitly or explicitly, then it is vital to understand precisely what is being assumed. Recent events have shown us that our collective understanding is shakey at best.

If time allows, I will continue with the other questions, but would be greatly spurred if you gave a hint at what prompted this list? Is that possible?
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