The Difference Between Savings And Investments

Intermediate Macro

Homework 1

1. Who was the founder of “classical” school of Economics and what was his key belief?
2. When and why did classical school lose its influence?
3. What is the main idea of J.M. Keynes in regard of government involvement in the economy?
4. When and why did Keynesian economic school lose its influence?
5. Why is post-2008 period challenging for Economics as a science?
6. What is the key [sometimes false] assumption of Micro-based Economics?
7. What is the key [sometimes false] assumption of Macro-based Economics?
8. What is market failure? What are the 3 types of market failures we discussed?
9. Write down Cobb-Douglas production function and name all the parameters.
10. State main assumptions of the mainstream economics in regard of the production.
11. Name at least two problems with the assumptions in the question above.
12. Define investments in economic sense.
13. Is there a difference between savings and investments? If yes, what is it?
14. In terms of the investments what is the main focus of mainstream economics?
15. In terms of the investments what is the main focus of realistic point of view?
16. Describe savings driven economy. What is the main problem of such an economic system?
17. Describe consumption driven economy. What is the main problem of such an economic system?
18. Give an example of event that contributes to GDP growth but has negative impact on “economic success” of a country.
19. Describe why unemployment is one of the most important economic indicators.
20. According to the mainstream economic view why unemployment is not a problem?
21. Why in reality unemployment is a huge problem and market mechanism does not solve it?
22. What relationship between the unemployment and inflation is assumed by the Phillips Curve? Describe theoretical background for such a relationship.
23. Does Phillips Curve relationship hold for the US in the last 20 years? Provide explanation.
24. Name top 3 sectors by employment in the US.
25. How do we measure unemployment? What are potential problems with measurements?
26. Bring an example why comparing unemployment level of different countries is problematic.
27. Describe fiscal policy and institution(s) in the US that are implementing it.
28. Describe monetary policy and institution(s) in the US that are implementing it.
29. What is the main point of Ricardian view of the fiscal policy?
30. What is the main point of Keynesian view of the fiscal policy?
31. What is the modern state of the debate about fiscal policy between main economic schools?
32. Why the market believes that Japan has lower sovereign debt risk compared to the US even though it has higher level of debt-to-GDP?
33. Calculate IP growth, YoY and MoM for August 2018 using this simplified model (2012 = 100):

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