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Activity 1.1: Quiz THE MODEL 

Overview

The activity is designed for students to internalise the differences between the two models regarding the type of intervention they suggest. It is accompanied by a follow-up activity to continue at home or in the next class.

Aims

  • To stimulate thinking about the theoretical concepts explained 
  • To explore the main mechanisms of the fiscal and monetary policies
  • To provide some basic facts about the Neoclassical and Keynesian Model 

Materials and time

No materials are needed. Time is adjustable from 30 minutes to an hour.

Group size

10 minimum

Instructions for trainers

  1. Break up the class into small groups.
  2. The teacher reads out the questions for each round (see Quiz Questions below) – there are 3 rounds with 3 questions in each round.
  3. According to the level of understanding of the audience, the teacher could decide to proceed with the activity as a quiz or to share the answers in cards that students should pick to ‘fill in the blanks’ of each question. See below the answers in the two different formats. 
  4. After each round, the teacher gives the answers to the questions and encourages discussion. In total, this part of the activity should take between 20 to 30 minutes. 
  5. The activity could be complemented with the follow-up segment described above to fill one hour of activity.

Questions

  1. Indicate at least two differences between the starting hypotheses of the neoclassical and Keynesian models.
  2. For the…..model the State should intervene in trying to offset the economic imbalances.
  3. Fiscal policy affects the …. and monetary policy affects the …
  4. The neoclassical model understands that the best policy to use in the face of economic imbalances is the …
  5. The Keynesian model understands that the best policy to use in the face of economic imbalances is the …
  6. What is the multiplier effect?
  7. Is tax reduction an element that defines fiscal or monetary policy?
  8. Who determines the money supply?
  9. Could monetary policy influence consumption?

Answers

1.

 NeoclassicKeynesian
PricesFlexibleRigid
EmploymentFull employment Underemployment
Public interventionNo, markets can regulate by themselves automaticallyYes, the economy needs regulation 

2. Keynesian
3. Fiscal policy affects the aggregate demand and monetary policy affects the money supply
4. Monetary
5. Fiscal
6. A series of chain reactions that happen after the aggregate demand is expanded by the public spending (fiscal policy) and that in the end increases private income and product growth in a greater way than that initially generated by the original stimulus.
7. Fiscal
8. Government/Central Bank
9. Yes, in a secondary effect. When the money supply increases, the interest rate decreases and real variables such as consumption and investment expand as people have fewer incentives to save on the one hand, and more incentives to get bank credit as their cost is low (the low rates) on the other hand, therefore generating incentives for financing consumption or investment with credits.

Quiz cards (to print) 

Flexible prices

Fixed prices

Full employment

Underemployment

Markets can regulate by themselves automatically

Markets can’t regulate by themselves automatically, they need regulation

Keynesian

Aggregate demand

Money supply

Monetary

Fiscal

A series of chain reactions that happen after the aggregate demand is expanded by the public spending (fiscal policy) and that in the end increases private income and product growth in a greater way than the initially generated by an original stimulus.

Fiscal

Government/Central Bank

Yes, in a secondary effect. When the money supply increases, the interest rate decreases and real variables such as consumption and investment expand as people have fewer incentives to save on the one hand, and more incentives to get bank credit as their cost is low (the low rates) on the other hand, therefore, generating incentives for financing consumption or investment with credits.

 
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