How well do you know your Macroeconomics?

[JP226]

http://ecedweb.unomaha.edu/ecedweek/quiz.htm

We all like to talk about polcies and their effects, but many of us don't really understand economics well enough to know one way or the other that such a policy might work. While it's true that economics is really nothing more than a guessing game, albeit somewhat educated, it's still good to atleast have a general idea as to why things happen. Why is it that the minimum wage is coupled with higher levels of unemployment? Why is it that an NHS or some other universal system, or even a ride at disney, come with built in waiting times? The answer can be found in economics. Unfortunately today, in the US anyhow, most's exposure to the subject are the business oreinted in college who may take two courses. Two woefully inadequate courses that don't particular offer any insight beyond supply and demand.

What i've gone on to do is look up a quiz. It's a quiz that offers some practical concepts in macroeconomics with questions pertaining to the role of the fed and actual definitionary( is that even a word?) questions along the lines of policy. Feel free to post your scores, and at the end they show how you match up with the rest of the US populace.

[Bovril]

This quiz is absurd. Many of the questions it asks are extremely nuanced or controversial, and it tells people that a single, extremely simplistic, answer is correct. It seeks to delude people into thinking that an ideology is a reality. It offers no actual understanding of the concepts involved, and only seeks to indocrinate participants by conflating facts with ideology.

Thumbs down.

[JP226]

It's all text book definitions... There is no ideology/ brainwashing going on.

[Bovril]

It's all text book definitions... There is no ideology/ brainwashing going on.

Which text books?
Example:
Q: What is the basic purpose of profits in our market economy?
A: Lead businesses to produce what consumers want.

This is so absurdly simplistic, and ideologically loaded, that it barely deserves comment. Corporations in much of the West are by law required to produce wealth for shareholders. They pay billions of dollars each year to manipulate demand in order to do just that (advertising). The idea that profits are there soley to tell us what people want is fraudulant, probably willfully so.

[JP226]

This is so absurdly simplistic, and ideologically loaded, that it barely deserves comment. Corporations in much of the West are by law required to produce wealth for shareholders. They pay billions of dollars each year to manipulate demand in order to do just that (advertising). The idea that profits are there soley to tell us what people want is fraudulant, probably willfully so.

In the economics world price, which translates to profits, is solely a mechanism to address the demands of the market. You go where the price/ profit signals are. Nothing more, nothing less.

[Bovril]

Uggh, that is agonizing. Yes I get it, you read a philosophy book on econ and are all of a sudden an expert.

In the economics world price, which translates to profits, is solely a mechanism to address the demands of the market. You go where the price/ profit signals are. Nothing more, nothing less.

That didn't adress what I said. At all.
The idea that profits have an single economic purpose depends on your model of what the economy is for. That is so obvious that it requires a very good education to be able to not see it. No human being thinks "I will use profits to tell me what people want, so that I can better serve them". This is a fiction of a particular model of economics which is absurdly reified and has none of the predicitve power it claims would justify itself. You absolutely fail to account for advertising, the relationship between governments and the market, and plain old human preferance and falibility.

And no, I did not read a "philosophy book on econ" and "think I'm an expert". However, I am an intelligent enough layman to recognise that there is more to life than the narrow assumptions of rational choice neo-classical economists.

[Каие]

I got them all right. Does this mean I get an economics degree or something? (Very basic questions, I find it hard to believe no one knows them)

[JP226]

The idea that profits have an single economic purpose depends on your model of what the economy is for. That is so obvious that it requires a very good education to be able to not see it. No human being thinks "I will use profits to tell me what people want, so that I can better serve them". This is a fiction of a particular model of economics which is absurdly reified and has none of the predicitve power it claims would justify itself. You absolutely fail to account for advertising, the relationship between governments and the market, and plain old human preferance and falibility.

It has nothing to do with a corporation or individual person's goal/ idea and that's not what the question is saying either. It's what the mechanism is actually doing. Sure the goal of a corporation is to maximize the price of it's stock. But by maximizing the stock price, and other corporations doing the same, we see that price is playing a real role in the economy in bringing together both supply and demand and efficiently allocating resources. Traditionally the greatest gaps in supply and dermand are accompanied by the greatest price incentives. When companies and people jump in to make money efficiencies and competition engage in a ceative destruction process that dirves the price down and markets continued evolution.

I got them all right. Does this mean I get an economics degree or something? (Very basic questions, I find it hard to believe no one knows them)

Well, I had a much harder one that actually dealt with things like elasticities and consumer/ producer surplus and other micro issues. I can put that one up.

[Bovril]

It has nothing to do with a corporation or individual person's goal/ idea and that's not what the question is saying either. It's what the mechanism is actually doing. Sure the goal of a corporation is to maximize the price of it's stock. But by maximizing the stock price, and other corporations doing the same, we see that price is playing a real role in the economy in bringing together both supply and demand and efficiently allocating resources. Traditionally the greatest gaps in supply and dermand are accompanied by the greatest price incentives. When companies and people jump in to make money efficiencies and competition engage in a ceative destruction process that dirves the price down and markets continued evolution.

One cannot ask "what is the basic purpose...?" without assuming volition, or at least teleology. The question did not ask "what is the effect...?". This slight of hand seems to have been missed by you, but it has vital ideological ramifications.

Besides, in every country in the world, but particularly in industrialised societies, the idea that demand is a nuetral, natural process is just ridiculous. This is most obvious when selling books or albums, but is still relevant when selling bread or even water.

Unless we imagine that the economy has no humans participating in it, and instead independent automatons making fully informed decisions about inate, unmanipulated needs, the sort of simplistic mechanism implied by the question and answer is redundant.

Besdes, price is determined by bargaining power, not demand. Whilst this is tacitly understood, but largely ignored, by macro-economists, it needs to be driven home in a lay context.

[Каие]

Please do.

[JP226]

http://tutor2u.net/quiz/economics/as...quizmaker.html

I think this was it, it's not THAT bad.

[Каие]

http://tutor2u.net/quiz/economics/as...quizmaker.html

I think this was it, it's not THAT bad.

Did this already in school, it's one of the main tools we use to learn, Tutor2u in the UK.

[JP226]

Besides, in every country in the world, but particularly in industrialised societies, the idea that demand is a nuetral, natural process is just ridiculous. This is most obvious when selling books or albums, but is still relevant when selling bread or even water.

What the hell? Neutral natural process? You mean linear and predictable?

Unless we imagine that the economy has no humans participating in it, and instead independent automatons making fully informed decisions about inate, unmanipulated needs, the sort of simplistic mechanism implied by the question and answer is redundant.

Despite the simplification of many of our models, they tend to work fairly well. It's not because the individual is crazy, or not crazy in that case. It's because averages are farily predictable and in general an increase in price is going to lead to a decrease in demand. That's the whole reason why the predictive power and results for that matter of an OLS is many times better than some of the more advanced modelling techniques because we aren't that crazy. We're linear more often than not.

I don't understand why you get on these, the individual is unpredicatable band wagon from time to time. Ok that's fine I guess but it's not really relevent to something like economics as a whole. THose individuals that show up every once in a while and would rather pay twice the price for the same loaf of bread are outliers. Statistically insignificant and not worth the debate.

[Bovril]

What the hell? Neutral natural process? You mean linear and predictable?

No, I mean legitimately treated as an independant variable per se, to put it in statistical terms. Demand is so very rarely treated as a dependent variable by economists, but so very frequently treated as such by people who are actually involved in markets.

Despite the simplification of many of our models, they tend to work fairly well. It's not because the individual is crazy, or not crazy in that case. It's because averages are farily predictable and in general an increase in price is going to lead to a decrease in demand. That's the whole reason why the predictive power and results for that matter of an OLS is many times better than some of the more advanced modelling techniques because we aren't that crazy. We're linear more often than not.

I don't understand why you get on these, the individual is unpredicatable band wagon from time to time. Ok that's fine I guess but it's not really relevent to something like economics as a whole. THose individuals that show up every once in a while and would rather pay twice the price for the same loaf of bread are outliers. Statistically insignificant and not worth the debate.

These claims rest on the idea that economists have a good record when it comes to predictions. Since mainstream economists cannot even agree on what to predict, let alone get it right, this seems an odd claim. Very simple relationships, such as between supply and demand, have a fairly good correlation when all other factors are eliminated. But is that much use to us?

On the 'pay the double for the same loaf of bread point', we should probably remember that in many spheres, such as make up, clothing, films, etc. the perception of the product is largely created by advertising, and in the case of make up it can be empirically shown that many expensive brands are no more effective than very cheap products. In other words, people pay a lot more than double for the same loaf of bread on a regular basis.

[Da Skinna]

I still managed to get four wrong. Of course I need to read all the answers first... (transfer income to the wealthy...)

[JP226]

No, I mean legitimately treated as an independant variable per se, to put it in statistical terms. Demand is so very rarely treated as a dependent variable by economists, but so very frequently treated as such by people who are actually involved in markets.

Dependent or independent? You used both. As a dependent variable one of the meat and potatos equations for econometrics is the demand equation which goes something like Qx= f(Px, Py, Inc, Taste, z). Typically, from personal experience, we regularly model with demand in our models, or some indicator of it such as revenue, inc elasticities and the like.

As far as the accuracy goes, the regular day to day modeling so often used by the government and corporations for that matter is more often nothing more complex than long division versus any kind of actual econometrics. And those estimates routinely jump out 4 years. Are they right? Eeeh, not so much, especially when the impact is out 4 years from today. However, the shgort range stuff looking at the next 6 mos to a year are regularly quite close. The econometric models are typically nothing more than least squares as I said earlier and they routinely pull in 5 to 10% RMSE. When the actual numbers come back later down the road, the initial analysis was good enough to be used. And it goes back to why that's the case. It's not because peole are all that complex and crazy. They aren't, they as a group are fairly simple to figure out.

On the 'pay the double for the same loaf of bread point', we should probably remember that in many spheres, such as make up, clothing, films, etc. the perception of the product is largely created by advertising, and in the case of make up it can be empirically shown that many expensive brands are no more effective than very cheap products. In other words, people pay a lot more than double for the same loaf of bread on a regular basis.

I'll agree that advertising creates a higher demand, but it doesn't necessarily make people buy the same good at twice the price. Some goods may be no more effective than others, but there are also other variables playing a role. Things like the classic "snob effect," maybe they like being noticed having the most expensive pair of pants or conversely the bandwagon effect. Advertising is playing a more complex role than just making people buy something more expensive. It's adding an intangible value. That's real in and of itself. But what I was speaking towards more is two loaves of bread, identical with one being twice the price.

[BNS]

I got 100%

@ Bovril are you sure you are not the one that is being blindly ideological? Just how do companies best make money for the share holders, by efficiently creating and fulfilling consumer demand. If this is somehow illogical then perhaps you could explain the adverse, the massive mismatch of resource allocation and lack of variety in goods and services in more totalitarian states.

I'll agree that advertising creates a higher demand, but it doesn't necessarily make people buy the same good at twice the price. Some goods may be no more effective than others, but there are also other variables playing a role. Things like the classic "snob effect," maybe they like being noticed having the most expensive pair of pants or conversely the bandwagon effect. Advertising is playing a more complex role than just making people buy something more expensive. It's adding an intangible value. That's real in and of itself. But what I was speaking towards more is two loaves of bread, identical with one being twice the price.

Not to mention that consumer confidence is part of the added cost to the more expensive products. At least in a profit economy you are given choices on which to buy.

[conon394]

Bovril –

Although I have little sympathy with JP266 on economics (as far as I recall from past threads) – multiple choice tests are always subject to your initial complaints in this case the issues with question are soluble based on the test.

No matter what your view on profits the supposed correct answer is in fact the only logic one given a course or two in business and economics: A is out since those are costs and thus D as well. C is debatable but given the explicit US nature of the rest of the questions I think one can assume the US economy is implied and no policy or market structure would ever really claim to transfer wealth to the rich – you know work hard an you can be the hero of a Horatio Alger book…so really B is the only viable option.

I would suggest the simple addition of ‘in a perfectly competitive market where consumers have perfect information’ is all that was left out (of course find one of those in the US today…).

[C-Rob]

almost all right. go me and my taking of economics last year. I actually learned something. *gasp*

Though hasn't the unemployment rate changed and gone higher?

[JP226]

Though hasn't the unemployment rate changed and gone higher?

It's a little dated.