Author Question: Which of the following events led to the crisis in macroeconomics and to the development of rational ... (Read 51 times)

piesebel · **on:** Jun 30, 2018

Which of the following events led to the crisis in macroeconomics and to the development of rational expectations theory?

A) the Great Depression
B) the stock market crash of 1987
C) the stock market speculative bubble of the late 1990s
D) stagflation in the 1970s
E) large budget deficits in the 1980s

Question 2

In the 1960s, there was significant debate between Keynesians and monetarists. Explain several aspects of this debate.

What will be an ideal response?

lindahyatt42 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

D

Answer to Question 2

There were three key areas of this debate: (1 ) the relative importance of monetary and fiscal policy; (2 ) the perceived stability of the Phillips curve; and (3 ) the role of policy to stabilize the economy.