“The co-winners of [the 2011] Nobel economics prize are two Americans whose work shows how important their discipline can be to public policy. They are Thomas Sargent of New York University and Christopher Sims of Princeton University. Working independently, the two men were major proponents of the ‘rational expectations revolution’ in economics. This sometimes complex theory was explained to us by Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University…He pointed to the Keynesian economic theory that government spending stimulates an economy, which underpins the economic policies of recent years, such as President Barack Obama’s $787 billion stimulus of January 2009. ‘People are not stupid,’ Mr. Adibi said. ‘If the stimulus leads, over the long term, to higher taxes to pay back the stimulus, then people won’t spend the stimulus money; they’ll save it to pay the taxes.’” (The Orange County Register, 26 October 2011) This conclusion about government stimulus illustrates the concept of Crowding out Ricardian Equivalence Liquidity trap Automatic stabilizers
“The co-winners of [the 2011] Nobel economics prize are two Americans whose work shows how important their discipline can be to public policy. They are Thomas Sargent of New York University and Christopher Sims of Princeton University. Working independently, the two men were major proponents of the ‘rational expectations revolution’ in economics. This sometimes complex theory was explained to us by Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University…He pointed to the Keynesian economic theory that government spending stimulates an economy, which underpins the economic policies of recent years, such as President Barack Obama’s $787 billion stimulus of January 2009. ‘People are not stupid,’ Mr. Adibi said. ‘If the stimulus leads, over the long term, to higher taxes to pay back the stimulus, then people won’t spend the stimulus money; they’ll save it to pay the taxes.’” (The Orange County Register, 26 October 2011) This conclusion about government stimulus illustrates the concept of Crowding out Ricardian Equivalence Liquidity trap Automatic stabilizers
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
“The co-winners of [the 2011] Nobel economics prize are two Americans whose work shows how important their discipline can be to public policy. They are Thomas Sargent of New York University and Christopher Sims of Princeton University.
Working independently, the two men were major proponents of the ‘rational expectations revolution’ in economics.
This sometimes complex theory was explained to us by Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University…He pointed to the Keynesian economic theory that government spending stimulates an economy, which underpins the economic policies of recent years, such as President Barack Obama’s $787 billion stimulus of January 2009. ‘People are not stupid,’ Mr. Adibi said. ‘If the stimulus leads, over the long term, to higher taxes to pay back the stimulus, then people won’t spend the stimulus money; they’ll save it to pay the taxes.’” (The Orange County Register, 26 October 2011)
This conclusion about government stimulus illustrates the concept of
Working independently, the two men were major proponents of the ‘rational expectations revolution’ in economics.
This sometimes complex theory was explained to us by Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University…He pointed to the Keynesian economic theory that government spending stimulates an economy, which underpins the economic policies of recent years, such as President Barack Obama’s $787 billion stimulus of January 2009. ‘People are not stupid,’ Mr. Adibi said. ‘If the stimulus leads, over the long term, to higher taxes to pay back the stimulus, then people won’t spend the stimulus money; they’ll save it to pay the taxes.’” (The Orange County Register, 26 October 2011)
This conclusion about government stimulus illustrates the concept of
- Crowding out
- Ricardian Equivalence
- Liquidity trap
- Automatic stabilizers
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education