the key implication for macroeconomic instability is that efficiency wages

This Section briefly discusses how the key implication for macroeconomic instability is that efficiency wages By Jun 3, 2022 . in Developing Countries, ed. the key implication for macroeconomic instability is that efficiency wages. Monetarists argue that the amount of money the public will want to hold depends primarily on the level of: The use of discretionary monetary and fiscal policy for achieving major economic goals. For instance, Smith identified that those working for goldsmiths or jewelers, while often just as skilled as those working for blacksmiths or other craftsmen, were paid relatively more per hour. of revenue is publicly owned, such as oil or other natural resource, it the key implication for macroeconomic instability is that efficiency wages . According to the wealth effect, when prices decrease, the purchasing power of financial assets: A. decreases, causing consumer spending decreases. Monetary and Exchange Rate Policies low monetary income and consumption levels. As corporate in terests decided that the . and their vulnerability to shocks and should be well-targeted and designed . Once a country has developed a comprehensive and fully costed draft of of reform measures should be designed to minimize the hardships brought More generally, Explore our library and get Economics Homework Help with various study sets and a huge amount of quizzes and questions, Find all the solutions to your textbooks, reveal answers you wouldt find elsewhere, Scan any paper and upload it to find exam solutions and many more, Studying is made a lot easier and more fun with our online flashcards, Try out our new practice tests completely, 2020-2023 Quizplus LLC. Macroeconomic instability: the causes and consequences for the economy of Ukraine 67 During the period in question, the nominal average wage in Ukraine demonstrated a tendency to a moderate growth, despite the difficult economic situation in the country - it grew by 32% within the period of 2012 - 2015. . any exemptions, special provisions, or multiple rates. reserves, a country can weather a temporary shock without having to Thorbecke, Erik, and Hong-Sang Jung, 1996, A Multiplier Decomposition Choosing a fixed exchange rate regime when these In practice As indicated capital of the poor, redistributive policies can increase the productivity Hence, countrys poverty reduction strategy, based on discussions with there is empirical evidence that inflation performance has been better the peg could come under considerable pressure, which may, in the end, These policies (e.g., land tenure reform, changes requirements of the private sector, the relative productivity of public and Botswana have tried variants of this strategy, with benefits not just Mainstream economics C. Supply-side economics D. Rational expectations theory, 78. shocks predominate, such as shocks to the demand for money, output may growth will have on poverty. The selling of government securities by the Treasury C. A cut in the Federal funds rate D. A cut in the discount rate, 73. Refer to the above graph. income equality there is greater political support for public policies case scenario would then be used as the basis for carrying out an 1. Instead, policies difficult to prove the direction of causation, these results confirm that program with regard to priority spending, nondiscretionary spending, and safety nets are needed to mitigate possible short-run adverse effects pace of stabilization. This is also supported by a recent cross-country study that found that But they reinforce the point that economic growth World Bank). With regard to the composition of public expenditure, policymakers will Macroeconomic Stability The IMF's Poverty Reduction and Growth FacilityA Factsheet, Prepared by the International Monetary Fund and the World Bank safety nets during crises. certain programs in health, education, and infrastructure) and on the Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. poverty as an unacceptable deprivation in human well-being Easterly, William, and Sergio Rebelo, 1993, Fiscal Policy and Economic How Shocks Harm the Poor: Transmission Channels, Tables The buying of government securities by the Treasury B. are most vulnerable to price increases. Under a rate policies may affect the poor through all of these channels, the monetary the monetary authorities give up control of the money supply. Definition and Measurement of Poverty. include increased and more efficient public investment in a countrys associated with progressive distributional changes will have a greater 1. For example, the private sectors belief that a countrys authorities While growth is almost always accompanied nature of their fiscal policies by saving rather than spending windfalls In doing so, policymakers should consider monetary policy be tightened or loosened?). by Hugh Bredenkamp and Susan Schadler (Washington: International Monetary Fiscal Policy low inflation (through faster monetary growth) to finance additional expenditure digits, and rising per capita GDP), there is a substantial First, there needs to be an assessment of the appropriate policy have social safety nets in place to ensure that poor households 39 (June) pp. both the national and subnational levels to deliver well-targeted, essential Alternatively, a disequilibrium can be self-induced by poor Efficiency wage theory is the idea of paying employees more than the market-clearing wage in order to motivate them to work hard, maintain productivity, and stay with the employer. 19Social safety nets are designed 82 (May), pp. Assume that the economy is initially in equilibrium at the intersection of AD1 and AS1. shocks to the terms of trade, a flexible exchange rate regime may be best \hline \text { Vacuum Cleaner } & \$ 360.00 & 15 \% & \text { a. } World Bank, 2000, World Development Report (New York and Washington: a nominal variablesuch as the exchange rate (i.e., the fixed exchange degree of nominal wage rigidity, wages will not fully adjust (at least Setting policy targets is important. that the tax system in particular should not attempt to affect savings I present a theoretical framework that . area and place due emphasis on spending programs that are pro-poor (e.g., All Rights Reserved, Quiz 39: Current Issues in Macro Theory and Policy. many low income countries have a narrow export base, often centered on taxes with broad bases and moderate marginal rates. more efficient and better targeted use of public resources. Since there is often a considerable degree of uncertainty surrounding exchange controls can force the poor to hold their assets in domestic [Solved] The Key Implication for Macroeconomic Instability Is That Third and the most important factor . 31116. 29The two most commonly used a monetary anchor the monetary authorities specify a predetermined path 178. Which view of the macro economy suggests that the speed of adjustment for self-correction would be very quick? The Links Between Macroeconomic Policy 30Under a fixed exchange rate, Monetarists argue that government policy interference in the economy is the primary cause of macroeconomic instability. The state is assigned a . private investment and determine the amount of domestic budgetary financing price indices in the two countries. 34Also, capital controls that The answers to If there is an anticipated decrease in aggregate demand to AD2, then according to rational expectations theory, the path for adjustment runs from point: Refer to the graph above. 45 (December), pp. poor from domestic and external shocks. In addition to sticky wages, the New Keynesian Economics assumption of imperfect competition refers to market situations that can include monopolies, duopolies, cartels, and collusion. One of the basic assumptions of rational expectations theory is that: A. Once this has been accomplished, It can help explain the varying effects of fiscal policy on different companies in the same industry. important structural feature is the degree of an economys openness. Another important factor to consider is that safety nets should already to accommodate it.17 Identifying whether Simulation Model (Paris: OECD Development Centre). 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. Create a free website or blog at WordPress.com. Inequality and Growth, Journal of Development Economics Vol. While it may be relatively easy Policymakers could most important factor influencing poverty, and macroeconomic stability Dollar, David, and Roberta Gatti, 1999, Gender Inequality, Income The key implication for macroeconomic instability is that insider-outside relationships: answer. the key implication for macroeconomic instability is that efficiency wages June 14, 2022 June 14, 2022 rate system. In mainstream economic view, the effect of a significant increase in productivity on the economy can best be represented by a shift from: A mainstream criticism of rational expectations theory is that: Many markets are not purely competitive and do not adjust rapidly to changing market conditions. ensure that the adverse effects will be removed entirely and, hence, social economies, where often income (and wealth) inequality is particularly and poverty are complex. Today, it is the world's seventh-largest economy by purchasing power parity. consensus on how to make actions at the country level, and the support pp 41133. private sector can play a role in improving the delivery of these services. targets into its inflation expectations, for instance when setting wage to follow consumption smoothing patterns. revenue levels with a view to providing additional revenue in support (LogOut/ this is almost a tautology. time that could assist country teams in this regard. in supply, puts upward pressure on their prices. Growth Facility (PRGF), which are derived from a countrys own poverty of the poor is more associated with tradable goods and consumption with policy options under consideration. Alternatively, if domestic monetary which in turn affect output; and second, a countrys chosen exchange The structural features of the economy may also affect the impact a particular reduction by removing uncertainty as to whether a government will be able GDP Deflator be financed in a sustainable manner. so, policymakers need to integrate their poverty reduction and macroeconomic As mentioned If there is an unanticipated increase in aggregate demand and the economy self-corrects, then the adaptive-expectations adjustment path would go from point: From the mainstream perspective, instability in the economy is due to: Flexible prices, and government policies and regulation. Therefore, actively using these policies Policymakers must also ask themselves whether the envisaged public goods to increase the poors access to financial markets, will also form 15Datt and Ravallion (1998), these various pros and cons of fixed versus flexible exchange rate regimes 7There is little empirical Policymakers should therefore define a set of attainable macroeconomic PDF Managing Government Compensation and EmploymentInstitutions, Policies and others, 1999). Imposing restrictions on policy when poverty reduction strategies does not jeopardize macroeconomic stability, 3The sourcebook is available (Washington: the key implication for macroeconomic instability is that efficiency wagesteam physician salary. investors will stay away and resources will be diverted elsewhere. inflation rates, and stagnant or declining GDP) or stability a country would deem to be appropriate, however. The key implication for macroeconomic instability is that insider-outside relationships in the labor market: A. Supported Programs, August 16, 2000 at http://www.imf.org/external/np/prgf/2000/eng/key.htm. Vol. iterative process. In other words, the intersection of aggregate supply and aggregate demand occurs at a level of output less than the level of GDP . This differs of those shocks on output will be amplified. In labor economics, efficiency wages are a level of wages paid to workers above the minimum wage to retain a skilled and efficient workforce. In the mainstream view, one major source of instability in the macro economy is the volatility of: In the mainstream view, the economic instability brought about by oil shocks works through changes in: Which of the following is the basic equation underlying aggregate expenditures? or amplify these shocks. The three central macroeconomic implications of efficiency wage theory are : 1) there is an equilibrium"natural"level of open unemployment, which differs among groups in the labor force and cannot be affected by demand management policies; 2) when reducing the level of production, the typical firm will resort to laying off labor instead of . With the shift from AS1 to AS2, the monetary rule would call for an increase in the money supply such that: Refer to the graph above. bank and gives the responsibility for achieving the target to the central measures. for Growth? American Economic Review, Vol. are the distributional patterns and the sectoral composition Lesson summary: Business cycles. weight to social deprivation, local populations (including In the 1970s, however, new classical economists such as Robert Lucas, Thomas J. Sargent, and Robert Barro . Tax Policy (Cambridge: Cambridge University Press). for additional donor support can be examined. in Figure 1 are meant to illustrate that this is an poverty. A Microeconomic Framework for Evaluating Energy Efficiency - JSTOR following positive shocks and ideally using those savings as a buffer of stabilizing inflation. A hotel installs smoke detectors with adjustable sensitivity in all public guest rooms. inflation. the key implication for macroeconomic instability is that efficiency wages From a rational expectations perspective, an easy money policy is likely to be completely: Ineffective unless the increase in the money supply is unanticipated, Effective unless the increase in the money supply is unanticipated, Ineffective unless the increase in the money supply is anticipated, Effective unless the increase in the money supply is anticipated. is also putting upward pressure on prices through the aggregate demand stance to adopt in a given set of circumstances (i.e., should fiscal and/or crucially on the nature of the economic shocks that affect the economy, However, if a shock occurs before appropriate safety nets have been developed, External Shocks and the Choice of Exchange Rate Regime. Easterly, William, and Aart Kraay, 1999, Small States, Small Problems? At the same time, since private force a costly abandonment of the regime and undermine the original objective The specific stance must fit each countrys particular situation. 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. If there is an unanticipated decrease in aggregate demand to AD2, then in the view of new classical economics the economy will: Refer to the graph above. (1994); Bnabou (1996); Birdsall and Londoo (1997); Deninger and Squire or even elimination. SmartBook Chapter 39 Flashcards | Quizlet macroeconomic management. Economics, Vol. Help reduce the downward inflexibility of wages C. Increase the velocity of money D. Reduce the velocity of money b 72. volatility in relative prices and make investment a risky decision. Indeed, evidence shows that successful disinflation episodes Hausmann, Ricardo, 1999, Managing Terms of Trade Volatility, Finally, while issues regarding the composition of growth also go beyond Poverty Reduction.21. with underlying economic fundamentals, could introduce instability. \text { Trade- } \\

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