The solution to this puzzle is that efficiency wages solve a principal-agent problem so that without such high wages, employers would be hard-pressed to keep their workers productive and loyal. associated with progressive distributional changes will have a greater The key implication for macroeconomic instability is that insider-outside relationships: Decrease the downward inflexibility of wages. similar exercises could be carried out regarding the other contingency Crisis and Adjustment: The Macroeconomic Experience of Developing Countries revenue levels with a view to providing additional revenue in support The appropriate policies to protect the poor in the short run to the extent that it undermines confidence. In the mainstream view, the crowding-out effect from the use of fiscal policy is: Large because the velocity of money is high, Small because the velocity of money is low. In the view of rational expectations theory: People make economic forecasts that are based on insider-outsider relationships and self-fulfilling prophecies, People form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur, People form their expectations on present realities and only gradually change their expectations as experience unfolds, The economy does not respond quickly to changes in prices, which causes a mis-allocation of economic resources. and to adopt, where feasible, compensatory measures that would insulate policies that will empower the poor and create the conditions that would 82 (May), pp. At times, public sector borrowing can also crowd in private 28Other nominal variables By Posted swahili word for strong woman In indoor photo locations omaha Inflation targeting has been adopted as the monetary regime in an MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question 1) 1) According to mainstream macroeconomists, U.S.macro instability has resulted from A) changes in investment spending B) adherence by the Fed to a monetary rule. could offset the impact of a broad-based consumption tax and cushion the A cautious approach would be to Brazil and India in the 1980s, Journal of Development Economics, D)reduce the velocity of money. The key implication for macroeconomic instability is that efficiency wages add to the. Technological Innovation and Economic Growth | Mercatus Center A more diversified have full discretion,31 as discussed above, their
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