1: "For many years, the hands-off fiscal policies advocated by the classical economists held sway with American government. When times were hard, the prevailing response was to tough it out, awaiting the 'inevitable' turnaround. The lessons of the Great Depression and a booming wartime economy have since taught us, however, that government intervention is sometimes necessary and desirable-and that to an extent, we can take charge or our economic lives." Evaluate the foregoing quotation based upon the discussion of a brief history of macroeconomic thought and policies. How would you classify the speaker in terms of a s school of economic thought?
2: If the economy is operating below its potential output, what kind of gap exists? What kinds of fiscal or monetary policies might you use to close this gap? Can you think of any objection to the use of such policies?
3: Why does the failure to adjust the poverty line for regional differences in living costs lead to an understatement of poverty in some states and an overstatement of poverty in others?
4: The Case in Point on Income Inequality in the United States versus the continental Western Europe argues that people get, in effect, what they expect. People in the United States attribute success to hard work and skill, while people in Continental Western Europe attribute success to connections, luck and corruption. With what set of views do you agree? Explain.