What do you think are the most serious obstacles to further progress in the developing world?
What will be an ideal response?
The main point here is to ensure that students are thinking carefully about the issues raised in the text. You may also wish to draw from the critical questions on Pages 9–11.
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When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called
A) the multiplier effect. B) entitlement spending. C) fiscal policy. D) crowding out.
According to the new classical macroeconomists, each of the following statements is true EXCEPT:
A) Disinflation will be harder to bring about because of the time-inconsistency problem. B) Policymakers are tempted to deviate from the preannounced policy once the public changes its expectations. C) Feedback rules are preferred to discretionary rules. D) Disinflation will be painless if the restrictive policies announced by the government are credible.