No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Seventeen: A Short History of Macroeconomics 441 CHAPTER SEVENTEEN ANSWERS 1. False. 2. False. 3. False. 4. False. 5. True. 6. False. 7. False. 8. True. 9. False. 10. True. 11. A general glut can be characterized by either too many goods/services produced, or too little consumption. But the key is that the depression is general and that all markets are equally “out of whack” (now that’s a technical economics term!)*, such that the solution is increased spending—the problem is generally conceived as not enough money circulating in the economy. The focus is on the demand side of the economy, and how to get consumers spending again. With a disproportionality in production, there is seemingly too many goods produced, because all lines of business are “in a funk” (yes, that’s another technical economics term!)*. Yet the cause of this depression that affects businesses generally is the failure to produce products that consumers want in the correct proportions. The focus in this view is on the supply side of the economy. Rather than trying to stimulate consumption, this view wants to see relative prices adjust so that goods are produced in the correct proportion that consumers want. * Ok, more formal students can simply replace “out of whack” and “in a funk” with “depressed” and you’ll be fine!