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

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HW Reader, p