Download 11 - Stephen Kinsella

EC4004 Economics for Business Worksheet Week 11
Concepts we covered in class in week 10
1. Fiscal policy vs Monetary Policy
2. AS/AD model
Questions for discussion in tutorials
1. Can Ireland spend its way out of the current economic downturn? Should
it?
2. “The Oil Crises of the 1970’s were supply crises, the Great Depression and
our current economic downturn in Ireland are examples of a demand
crisis.” Discuss this statement and highlight the different policy
prescriptions being offered by different commentators on Ireland’s
current macroeconomic situation.
Review Questions
When the supply of credit is fixed, an increase in the price level stimulates the
demand for credit, which, in turn, reduces consumption and investment
spending. This effect is called the
a. real balances effect.
b. interest-rate effect.
c. net exports effect.
d. substitution effect.
Classical economists believed that the
a. price system was stable.
b. goal of full employment was impossible.
c. price system automatically adjusts the economy to full employment in the
long run.
d. government should attempt to restore full employment.
Assuming a fixed aggregate demand curve, a left- ward shift in the aggregate
supply curve causes
a. (an) a. increase in the price level and a decrease in real GDP.
b. increase in the price level and an increase in real GDP.
c. decrease in the price level and a decrease in real GDP.
d. decrease in the price level and an increase in real GDP.