Keynesianism

MK, Unit 23

Reading p. 117

Read the text and underline the main ideas connected with classical economic theory, Keynesianism, and Monetarism.

Do the comprehension exercise on p. 118.

Fill in the gaps In the long run, excess savings cause interest rates to

___ and investment to ___ again. – classical economic t. The ___ is self-regulating. –classical economic t. ___ intervention in the economy is necessary to ___ the

business cycle. – Keynesianism Market forces could produce a durable equlibrium with

___ unemployment, ___ goods, ___ rates of income and investment. – Keynesianism

Governments shouldn’t ___ with the economy. Their only job should be to ___ a constant non-inflationary ___ in the money supply. - Monetarism

___ the money supply will only lead to inflation. - Monetarism

Fill in the gaps In the long run, excess savings cause interest rates to fall

and investment to increase again. – classical economic t. The economy is self-regulating. –classical economic t. Governmental intervention in the economy is necessary to

counteract the business cycle. – Keynesianism Market forces could produce a durable equlibrium with

high unemployment, fewer goods, reduced rates of income and investment. – Keynesianism

Governments shouldn’t interfere with the economy. Their only job should be to ensure a constant non-inflationary growth in the money supply. - Monetarism

Increasing the money supply will only lead to inflation. - Monetarism

The subprime ciris and the credit crunch

MK, Unit 14

What are these? Find the corresponding term in the reading. (MK, p. 75) People who are unlikely to repay their loan. – subprime borrowers /people with a high risk of

default A security, that an investor would buy because

(s)he wants to get a regular income from people who are paying off the mortgage on their houses.

– MBS and CDO When I bought my house, it was worth $300.000,

house prices fell, it is now worth $90.000! – the debt is greater than the value of the house

Video – Watch this at home too!!!

http://www.crisisofcredit.com/

HW

Reader, p. 32-35