Chapter Questions
Are modern macro models better characterized as engineering models or deductive scientific models? Explain your answer. LO1
Are standard macro models better characterized as engineering models or deductive scientific models? Explain your answer. LO1
When did macroeconomics emerge as a separate discipline? Why did it happen at that time? LO2
What did early macroeconomists believe about the economy that justified a separate macroeconomics? LO2
How did the fact that the modeling of consumption within the standard model fell short of fitting real-world data lead to changes in the model in the 1960s? LO2
What changes did macroeconomists make to the consumption portion of the standard model in the 1960 s to make it better fit real-world data? $\mathrm{LO} 2$
What is New Classical macroeconomics? LO2
What distinguishes New Classical macroeconomics from Keynesian economics? LO2
Explain the meaning of each of the letters in DSGE. LO4
What is the Ricardian equivalence problem? LO5
Why might a government want to establish credibility with regard to fighting inflation? LO5
Why might a government break its promise of fighting inflation? LO5
What is the time-inconsistency/credibility problem? LO5
What is the Lucas critique problem? LO5
Why does the author believe that it is problematic to draw precepts from the DSGE model? LO5
What does the collapse of the Tacoma Narrows Bridge have to do with modern macroeconomics? LO6
Demonstrate how historically based expectations can lead to increasingly greater fluctuations in prices. LO3
How is the complex systems approach to macroeconomics an improvement to both the standard and neoclassical macro models? LO6
Why is learning in the complex systems approach an ongoing process? LO6
How does the learning model by Brock and Hommes explain unexpected price fluctuations? LO6
How does herding lead to price fluctuations? LO6
How can instability create more instability? LO6