Explain how the credit-generated view of money creation differs from the neoclassical view that banks first need to attract savings before making loans. What drives loan creation in the endogenous money view?

QUESTION 1

Explain how the credit-generated view of money creation differs from the neoclassical view that banks first need to attract savings before making loans. What drives loan creation in the endogenous money view?

QUESTION 1.5

Say that, from an initial balanced budget, government spending increases. Explain what happens next in (a) Keynes (b) the neoclassical long run and (c) in the Modern Monetary Theory (MMT) view (which is in the tradition of Keynes). In your discussion, explain what the form of the investment function is in the neoclassical model.

QUESTION 2

In what way is the neoclassical theory of investment different from that proposed by Keynes? Explain why tax cuts to promote investment work automatically in the former though not necessarily in the latter. You can assume that the government’s budget is in balance here so that a tax cut is accompanied by an equal government spending cut.

QUESTION 3

Explain Samuels’ (1989) discussion of government’s (politics and law) relationship to the economy. Illustrate with the help of his Alpha/Beta example.

QUESTION 4

What is the difference between the endogenous and exogenous theories of money? How would you critique the money multiplier model which is the basis of the exogenous money approach?

Requirements: 1 paragraph answers

NEW YORK UNIVERSITY

SCHOOL OF PROFESSIONAL STUDIES

Division of Applied Undergraduate Studies (DAUS)

Summer 2023

Introduction to Macroeconomics

ECON1-UC0301.001

FINAL EXAM

Instruction: Please answer both questions in the exam itself. The exam is open book/open notes.

All exams must submitted by 8 pm EST in Brightspace. I will not accept late submissions.

QUESTION 1

Explain how the credit-generated view of money creation differs from the neoclassical view that banks first need to attract savings before making loans. What drives loan creation in the endogenous money view?

QUESTION 2

Say that, from an initial balanced budget, government spending increases. Explain what happens next in (a) Keynes (b) the neoclassical long run and (c) in the Modern Monetary Theory (MMT) view (which is in the tradition of Keynes). In your discussion, explain what the form of the investment function is in the neoclassical model.

Extra Credit: How does the investment function in Keynes and the real world differ from the neoclassical one? How would you respond to the argument that an increase in savings (loanable funds) has no effect on aggregate bank reserves and credit?

QUESTION 2

In what way is the neoclassical theory of investment different from that proposed by Keynes? Explain why tax cuts to promote investment work automatically in the former though not necessarily in the latter. You can assume that the government’s budget is in balance here so that a tax cut is accompanied by an equal government spending cut.

QUESTION 3

Explain Samuels’ (1989) discussion of government’s (politics and law) relationship to the economy. Illustrate with the help of his Alpha/Beta example.

QUESTION 4

What is the difference between the endogenous and exogenous theories of money? How would you critique the money multiplier model which is the basis of the exogenous money approach?

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