Page 273 - DECO402_Macro Economics

Macroeconomic Theory

Notes Self Assessment
State whether the following statements are True or False:
7. Those followers of theory of Keynes, advocate for an active fiscal policy for reducing
unemployment.
8. Similarly if government for reducing unemployment, increases money supply through an
expansive monetary policy, then it will also be ineffective in short term.
9. It is the faith of Ratex’s economists that government does not have a deep impact on economic
policies.
10. Gordon has completely rejected the reason of Ratex hypothesis.

30.5 Summary

y Mooth’s imagination of rational expectations is related to microeconomics. Many economists
were not satisfied by it. Hence it remained inactive for ten years. During the beginning of the
decade of 1970, Robert Lucas, Thomas Sargent and Neil Wallace used this thought for the
problems of macroeconomics policies.

30.6 Keywords

y Stagflation—Speed-less inflation.
y Past—Previous.

30.7 Review Questions

1. What are adaptive expectations? Describe.
2. Describe rational expectations.
3. Comment of ‘Stabilisation policy' and 'Ratex hypothesis.

Answers: Self Assessment
1. forecasts 2. economic policies 3. (a) 4. (b)
5. (a) 6. (b) 7. True 8. True
9. False 10. True

30.8 Further Readings

Books 1. Macroeconomics— S.K. Chakravarty, Himalaya Publishing House, 2010.
2. Macroeconomics: Economic Growth, Fluctuations and Policies— Robert
E. Hall and David H. Paipal, Vaina Books, 2010.

266 LOVELY PROFESSIONAL UNIVERSITY