Question

answer these short essay questions.

Macroeconomics

1. Name and explain the two schools of thought in macroeconomics.

2. Define structural stagnation. How does it differ from a business cycle?

3. Why is specialization and the division of labor important to economic growth?

4. How do you define " per capital growth"?

5. What are the two growth models? Name the key element that each model is based on.

6. Discuss two sources of economic growth.

7. What role does comparative advantage play in international trade?

8. Name three sources of U.S. comparative advantage.

9. What effect does currency depreciation/appreciation have on that country's exports?

10. Why is "private property" a source of economic growth?

11. How does tariffs and quotas effect equilibrium price and quantity of imported goods?

12. Why do most economist support free trade and oppose trade restriction?

Answer 1

1. There are various school of thoughts in macroeconomics which differ on the mechanism under which the market operates.

a. Classical School of thought: Major contributor to this school was Adam Smith. This school is of belief that  prices, wages and rates are flexible and markets always clear thus the prices fluctuate to balance the forces of demand and supply. Also as wages are flexible thus there is no unemployment in the market. Economic growth is dependent on the production level in the economy.

b. Keynesian School: This school primarily relate to the works of John Meynard Keynes. He believed that aggregate demans is the driving force to improve GDP growth. Thus governamnt must increase government expenditures and lower taxes to boost demand. Both fiscal and monetory policy interventions by the government are required by the government in order to bring the economic cycle on track after buisness cycle shocks.