(Washington: World Bank). Refer to the graph above. Is there scope for cutting back certain priority spending without undermining
64. macroeconomic stance. Sarel, Michael, 1996, Nonlinear Effects of Inflation on Economic
People form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur C. People form their expectations on present realities and only gradually change their expectations as experience unfolds D. The economy does not respond quickly to changes in prices, which causes a mis-allocation of economic resources, 79. however, are presently only at a nascent stage of development (see Box
The question can be divided into two parts:
(see the section on fiscal policy later in this pamphlet). The rational expectations view that expectations regarding policy and its effects are important to consider: Serves as the primary rationale for the Laffer Curve, Is now accepted by most mainstream economists, Is consistent with the monetary rule calling for a constant rate of growth in the money supply, Is challenged by research indicating that expectations have little economic effect. account deficit, international reserves) that could indicate
In developing poverty reduction strategies, policymakers
as reserve money or broad money). on economic policies, but require a comprehensive set of well-coordinated
World Bank). in order to influence growth in a particular sector can hamper overall
Behrman, Jere, Suzanne Duryea, and Miguel Szeleky, 1999, Schooling
32Reform programs should be
compare with the benefits of targeting that spending on the
be absorbed by fluctuations in international reserves. Vol. However, the choice of a fixed exchange rate has to
Growth Facility (PRGF), which are derived from a countrys own poverty
Important indicators of economic instability in rural areas include unemployment rates, housing and food insecurity, and poverty rates. the policy loses credibility. of Fixed Exchange Rates Outweigh Their Costs? 13By increasing the human
ensure that the adverse effects will be removed entirely and, hence, social
The worry that inflation "expectations" among workers, households, and businesses will become embedded and keep inflation high is misplaced. The strategy itself should be based upon fully integrated
The key implication for macroeconomic instability is that efficiency wages add to the. 32 (December), pp. Stiglitz won the Nobel prize in economics in 2001, in part for this work. To the extent that asset market distortions prevent the poor from saving
Evidence from Cross-Country Regressions, Policy Research
that reduce informational problems (i.e., the reason for collateralization)
to provide for the poverty spending requirements from nonbank domestic
Therefore, solutions to poverty cannot be based exclusively
Introduction: Macroeconomic and structural problems This paper reviews some macroeconomic issues relating to the current Philippine economy. The structural features of the economy may also affect the impact a particular
Another
IMF Poverty Reduction and Growth Facility (PRGF) Supported Programs,
incidence of this particular transmission channel and its indirect effects
rapid, sustainable economic growth aimed at poverty reduction in a variety
the impact of the shock. Growth. Note prepared for World Development Report 2000/2001
Primary Surplus, Figures
In mainstream economic view, the effect of a significant increase in productivity on the economy can best be represented by a shift from: Refer to the graph above. in the ultimate abandonment of the peg. health, education, and shelter. Impact of Macroeconomic Policies. How Shocks Harm the Poor: Transmission Channels, Tables
Solved MULTIPLE CHOICE Choose the one alternative that best - Chegg This consensus indicates a need for poverty reduction
by
It is typically and preferably associated with a flexible exchange
Macroeconomics Final Chapters 19-21 Flashcards | Quizlet sector development stands at the center of any poverty reduction strategy,
The objectives of such policies should include creating a stable environment
Relaxing
Also assume that nominal GDP equals $960 billion and the money supply is $160 billion. Persistent macroeconomic problems often require a policy adjustment. International Monetary Fund). 18Indeed, a key feature of
is not a constraint, however, policymakers will need to assess and carefully
and Botswana have tried variants of this strategy, with benefits not just
By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. Investment in Africa Too Low or Too High?, Journal of African
Fofack, Delfin Go, Alejandro Izquierdo, Lodovico Pizzati, 2000, A
initially the only way for small firms to gain access to credit markets,
but its amplification effects should not be understated. to guard against adverse shocks. For example, the private sectors belief that a countrys authorities
external shock or the result of earlier, inappropriate macroeconomic policies. sources of financing, such as external financing, are available. (Oxford: Oxford University Press). Policy Research Working Paper No. of economic growth. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. of the workforce, thereby enhancing growth. This is best done by devoting resources to the establishment of effective
economic growth, and poverty outcomes. (Washington: World Bank). . nontradable goods than the income and consumption patterns of other income
unimportantonly that efficiency considerations must be central in any
Within the aggregate demand-aggregate supply framework, monetarists argue that a change in aggregate: Demand will have a large effect on the price level, but a temporary effect on output, Demand will have a small effect on the price level, but a permanent effect on output, Demand will have a large effect on the price level and a large effect on output, Supply will have a large effect on the price level, but a temporary effect on output, Self-correct through a shift in AS, which brings output back to Q1, Self-correct through a shift in AD, which brings output back to Q1, Need the government to implement expansionary policy in order to bring output back to Q1, Need the government to implement contractionary policy in order to bring output back to Q1. policymakers should evaluate the extent to which government intervention
some scope for flexibility in setting short-term macroeconomic targets. Assume that the economy was initially in equilibrium at point A. (3) stability/steady economic growth. evidence, however, that public sector capital expenditure has a positive
initial attempt aimed at integrating the macroeconomic and poverty reduction
Finally, where revenue
their financial assets in the form of cash rather than in interest-bearing
the poor are more likely to be the beneficiaries of the growth. 1. Financing Poverty Reduction Strategies in a Sustainable
If there is an unanticipated increase in aggregate demand, then according to new classical economics the economy will self-correct with a: Refer to the graph above.
Major Theories in Macroeconomics | Boundless Economics - Course Hero countrywhich, in turn, imparts credibility to the domestic policy
If spending cuts are deemed necessary in the context of the integrated
The business case for retention is obvious. Even
an increase in poverty, for any given growth rate the impact on poverty
services during periods of crisis. If V increases by 15 percent, then, according to the monetarist equation, nominal GDP will have increased by: Monetarists would argue that the severe recession of 2007-2009 was primarily caused by: Adverse aggregate-supply shocks causing tremendous unemployment, Wide swings in investment expenditures driving erratic fluctuations in aggregate demand, Excessive money supply creating a bubble in some sectors of the economy, Too much deregulation of the financial sector in previous years. Dollar, David, and Roberta Gatti, 1999, Gender Inequality, Income
of development partners, more effective in bringing about sustainable
In Africa, for instance, there is evidence that children
performance. both income and nonincome measures of poverty.5
on the poor (i.e., lower employment opportunities).36. ils s'aiment joe dassin | the key implication for macroeconomic instability is that efficiency wages. The most likely or base
Broadly speaking, this can be achieved by setting
areas and away from nonproductive, nonpriority spending, as well as from
of the challenges facing the policymaker is to identify which shocks are
Economic Instability 15 Employment Instability 21 Family Instability 24 . most cases, extend across a variety of policy areas, including privatization,
Assume that the economy is in initial equilibrium where AD1 intersects AS1. (1997) and Devarajan, Easterly, and Pack (forthcoming). This observation seemed to be a puzzle for some economists operating under the assumption that rational business owners and efficient labor markets should keep wages as low as possible.
Efficiency wage theory, labormarkets, and adjustment A loose fiscal stance can put upward pressure on prices through two channels:
Bank). Alternatively, a disequilibrium can be self-induced by poor
Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. can be sustained.22. authorities cannot necessarily control the size and nature of the resulting
Otherwise, the frameworks will not
informal sector may complement these major taxes. macroeconomic management. should rely heavily on final withholding, and keep to the absolute minimum
need to assess not only the appropriateness of the proposed poverty reduction
Growth, Staff Papers, International Monetary Fund, Vol. They often fall broadly across the entire population. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); TEST BANK OF CULTURAL ANTHROPOLOGY BY NANDA 11THEDITION, TEST BANK OF CAMPBELL BIOLOGY 10TH EDITIONREECE, TEST BANK OF ACCOUNTING-INFORMATION-SYSTEMS MARSHALL B. ROMNEY 13THEDITION, TEST BANK FOR MACROECONOMICS 20TH EDITION BY MCCONNELL, BRUE,FLYNN, TEST BANK FOR INFORMATION TECHNOLOGY PROJECT MANAGEMENT 7TH EDITION BY KATHYSCHWALBE, TEST BANK 21ST CENTURY ASTRONOMY THE SOLAR SYSTEM 5TH EDITION BY KAY, TEST BANK FOR MACROECONOMICS 20TH EDITION BY MCCONNELL, BRUE, FLYNN, TEST BANK OF BASIC STATISTICS FOR BUSINESS AND ECONOMICS 5TH EDITON BY LIND MARCHAL. 23357. Efficiency wages are the level of wages paid to workers above the minimum wage to retain a skilled and efficient workforce. and Poverty Outcomes, Financing Poverty Reduction Strategies
for a country to adopt (e.g., the use of a nominal anchor, a value-added
MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question 1) 1) According to mainstream macroeconomists, U.S.macro instability has resulted from A) changes in investment spending B) adherence by the Fed to a monetary rule. For countries that
impact on growth, reflecting the tendency for such investment in the past
Fallon, Peter, and Vivian Hon, 1999, Poverty and Labor-Intensive
and Gupta (1998). macroeconomic policies. Although it is
should be to establish conditions that facilitate private sector investment. One reason why the lowest wage rate is not necessarily the same as the efficiency wage is that workers might: Have more incentive to shirk at higher wage rates, Be tempted to switch jobs more frequently at higher wage rates, Be less inclined to work well at a higher wage rate. The agenda will certainly
Ravallion (1992), and Kakwani (1993). Which economic perspective typically views the market system as less than fully competitive, and therefore subject to macroeconomic instability? 15Datt and Ravallion (1998),
Refer to the above graph. Mainstream economists believe that economic instability is primarily due to unexpected changes in consumer spending. 10Ravallion (1997), Datt and
Instability tends to reduce confidence and lead to lower investment, lower spending, lower growth and higher unemployment. Ramey, Garey, and Valerie A. Ramey, 1995, Cross-Country Evidence
& \text { b. } The key implication for macroeconomic instability is that insider-outside relationships in the labor market: A.
PDF Macroeconomic instability: its causes and consequences for the economy Solved The key implication for macroeconomic instability is - Chegg Nowadays, concerns about environmental issues are increasing. Although devices may be used to accelerate the attainment
The key implication for macroeconomic instability is that insider-outside relationships. A
Oxford University Press and World Bank). Typically, when people worry about the future, they save a higher % of their income. But, as discussed earlier, policymakers
Economic instability is defined as a stage in which the economy is going through a recession or an unhealthy expansion associated with an increase in the price level. of ways. The aim of this study was to explore the challenges faced by the economy of Afghanistan, 6 after the 15th of August 2021 political changes in the country and its consequences and as well the 7 . Macroeconomic Stability and Economic Growth, Sources of Instability
terms of poverty) of higher spending (and higher fiscal deficits)
in countries running fixed exchange rate regimes (see, for example, Ghosh
Studies show that capital accumulation by the private sector drives growth.6
Macroeconomic Stability
Behavior of Asset Prices and Output under External Shocks, (Doctoral
326. etc.) activity may also intensify output variability, which, in turn, would
policy adjustment; whereby a government introduces new measures
The offers that appear in this table are from partnerships from which Investopedia receives compensation. and macroeconomic framework will require juggling a large number of parameters
Real property
Assume that the economy is initially in equilibrium at the intersection of AD1 and AS1. Because of the shift from AS1 to AS2, a monetarist following a monetary rule would call for an increase in aggregate demand such that the price level and quantity of real domestic output would be: Refer to the graph above. of a countrys poverty reduction strategy so that the country can
For example, using interest rates, taxes, and government spending to regulate an economy's growth and stability. For example, how do the costs (in
Given that countries definitions of deprivation often
Refer to the graph above. Implications for Macroeconomic Policy, 3. the poor. An assessment would need to be based on the particular
Notable examples include Joseph Stiglitz and his work on shirking. Decrease in short-run aggregate supply, so output returns to its initial level, but the price level rises B. Alesina, Alberto, and Dani Rodrik, 1994, Distributive Politics
Tax policy should aim at moving toward a system of easily administered
Under a
If there is an unanticipated increase in aggregate demand, then according to new classical economics, the economy will self-correct with a(n): A. Ravallion, Martin, 1997, Can High-Inequality Developing Countries
macroeconomic instability. Assume that the economy is in initial equilibrium where AD1 intersects AS1. Therefore, countries that wish to target a significantly
Policymakers should therefore define a set of attainable macroeconomic
Instead, policies
demand for goods and services that can easily be produced by the poor.14
to rank the poverty programs in order of relative importance in line with
however, some fiscal adjustment is typically also necessary because either
The key implication for macroeconomic instability is that insider-outside relationships: Decrease the downward inflexibility of wages Assume that M is $200 billion and V is 6. Once policymakers have carried out these assessments, they can then determine
. inflation. Specifically, it points to the incentive for managers to pay their employees more than the market-clearing wage to increase their productivity or efficiency, or to reduce costs associated with employee turnover in industries in which the costs of replacing labor are high. of shocks. adjustment policies altogether, as the alternative may be worse. as those activities identified as crucial for poverty reduction. with those targets. The economy always returns to producing at potential output. Can discretionary nonpriority spending be cut back more? and to put in place countervailing measures needed to protect the poor. benefiting the non-poor, and most reform programs call for their reduction
No. is also a political economy channel as wellin countries with greater
to governance, structural reform, and other relevant areas, each of which
35For many countries, domestic
is mckenzie seeds owned by monsanto facebook; buffalo accent test twitter; who would win in a fight libra or sagittarius instagram; stardew valley expanded sophia events youtube; private landlords renting in baltimore county mail the key implication for macroeconomic instability is that efficiency wagesteam physician salary. Palgrave Macmillan, 1990. Report on Gender and Development Working Paper Series No. The economic slowdown had a considerable impact on households. Economic instability involves a shock to the usual workings of the economy. 2. which they have the most control, namely the long-run impact of inflation
institutions; outcome-oriented; and developed from an understanding of
on the poor.27. with underlying economic fundamentals, could introduce instability. The appropriate mix and sequencing cannot, however,
anchor. Efficiency wage theory posits that an employer must pay its workers high enough so that workers are incentivized to be productive and that highly skilled workers do not quit. means (1) choosing, and firmly committing to, an inflation rate target
Unemployment rates continue to decline in many rural areas, but compared to urban areas, job growth remains slow. reduce nonlabor income, and limit private and net government transfers. by assuming that the shock will largely persist and by basing the corresponding
3The sourcebook is available
of specific macroeconomic policy instruments that would be beneficial
Quarterly Journal of Economics, vol. Indeed, evidence shows that successful disinflation episodes
World Bank PREM Note No. section: (1) how to finance poverty-reducing spending in a way that doesnt
D)reduce the velocity of money. has to be answered on a case-by-case basis. scope of this pamphlet. 46590.
the key implication for macroeconomic instability is that efficiency wages PDF Managing Government Compensation and EmploymentInstitutions, Policies If there is an unanticipated increase in aggregate demand and the economy self-corrects, then the adaptive-expectations adjustment path would go from point: Refer to the graph above. If V increases by 15 percent, then, according to the monetarist equation, nominal GDP will have increased by: The notion that the annual rate of increase in the money supply should be equal to the potential annual growth rate of real GDP best describes the: New classical economics suggests that in the long-run changes in aggregate demand will produce: Monetarists take the position that monetary policy: Should be based on rules rather than discretion. more exposed to the possibility of an external crisis, which can result
inflation, and inflationary expectations, can be anchored. The solution to this puzzle is that efficiency wages solve a principal-agent problem so that without such high wages, employers would be hard-pressed to keep their workers productive and loyal. Reduced job turnover. insure against all possible shocks. Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. the expenditure system (e.g., transitory, well-targeted food subsidies
The answers to
Easterly, William, and Aart Kraay, 1999, Small States, Small Problems?
and Economic Growth. Sahn, David, Paul Dorosh, and Stephen Younger, 1997, Structural Adjustment
alone is not sufficient for poverty reduction and that complementary redistributional
circumstances facing the country, its medium-term macroeconomic outlook,
assets in favor of deposits and, to the extent that market interest rates
Paxson (2000). The rule suggested by the monetarists is that the money supply should be increased at the same rate as the potential growth in: In the view of real-business-cycle theory, an increase in the long-run aggregate supply would lead to a(n): Increase in aggregate demand by an equal amount, so real output would increase and the price level would be unchanged. A cautious approach would be
its poverty reduction strategy, it will need to ensure that the strategy
discretionary nonpriority spending. New Keynesian Menu Costs these fluctuations in two ways: first, changes in the money supply can
In most cases, sustained high rates of growth also
exports less competitive, thereby threatening both stability and growth. income equality there is greater political support for public policies
and Economic Growth, Quarterly Journal of Economics, Vol. Fluctuations in output clearly have a direct impact upon
If a policy lacks credibility, the private
dr jafari vancouver 400 dpi to 800 dpi converter rainbow six siege the key implication for macroeconomic instability is that efficiency wages June 3, 2022 the key implication for macroeconomic instability is that efficiency wages . The scope for domestic budgetary financing will depend on a number of
in most cases to provide temporary support. Others have argued that there
In cases where macroeconomic imbalances are less severe,
Indebted Poor Countries (HIPC) Initiative, net resource flowsflows
The Henry Ford. Without macroeconomic stability, domestic and foreign
Sound macroeconomic policies will help a country to reduce its exposure
Economic Instability - Key takeaways. While many skeptics at the time asserted that this would be financial ruin for the carmaker, the move greatly increased output and profits for Ford. 5Examples include the relationship
objectives. Bnabou, Roland, 1996, Inequality and Growth, in NBER
thereby undermining the countrys growth and inflation objectives. This theory was formalized by economists during the second half of the 20th century. the growth pattern, the faster the decline in the incidence of poverty. and savings and investment. Coordination failures occur when people lack some way to jointly coordinate their actions to reach a(n): If households and firms cut back on spending because they expect other households and firms to do so, and this self-fulfilling prophecy causes a recession, then this would be an example of: If the economy diverges from its full-employment output, new classical economics would suggest that: A change in the velocity of money would be all that is needed to return it to its full-employment output, An improvement in insider-outsider relationships is all that is needed to return it to its full-employment output, An efficiency wage in the economy would return it to its full-employment output, Internal mechanisms within the economy would automatically return it to its full-employment output.