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survey of economics

Questions and Answers of Survey Of Economics

=+c. Fora third year, Maria keeps the $1,000 in the drawer. What is the real value of this $1,000 at the beginning of the third year?
=+ Over the year, the inflation rate is again 10%. What is the real inflation tax paid by Maria for the second year?
=+b. Maria continues to keep the $1,000 in her drawer for a second year. What is the real value of this $1,000 at the beginning of the second year?
=+What is the real inflation tax paid by Maria for this year?
=+. Maria Moneybags keeps $1,000 in her sock drawer for a year. Over the year, the inflation rate is 10%.
=+4. Answer the following questions about the (real) inflation tax, assuming that the price level starts at 1.
=+. Why is it important for the central bank to be independent of government policy makers?
=+b. How did the change in the monetary base help in the government's efforts to finance its deficit?
=+a. How much did the monetary base change in the last year?
=+3. EF acess the Discovering Data exercise for Chapter 31 online to answer the following questions.
=+c. Although the economy experienced inflation in the 10% to 20% range three years ago, prices have recently been stable and the unemployment rate has approximated the natural rate of unemployment.
=+b. The economy has just experienced five years of hyperinflation.
=+a. The economy has high unemployment and no history of inflation.
=+2. In the following examples, would the classical model of the price level be a useful model for analyzing how the economy behaves?
=+% Real GDP Krugman/Wells, Macroeconomics, Se, © 2018 Worth Publishers.
=+policy will ultimately result in a higher aggregate price level but no change in real GDP.Aggregate price level, A
=+1. In the economy of Scottopia, policy makers want to lower the unemployment rate and raise real GDP by using monetary policy. Using the accompanying diagram, show why this
=+3. Why did the Argentine government try to stop Argentinians from converting pesos into foreign currency, such as dollars?
=+ 2. What were the implications of Ar control for Argentine businesses?
=+ 1. What was the relationship between inflation and the Argentine government’s chronic budget deficits?
=+Why won’t anyone lend money at a negative nominal rate of interest? How can. this pose problems for monetary
=+Are there ways to reduce these costs?
=+3. Why is disinflation so costly for an economy?
=+How might these facts be related?
=+During that period, Britain experienced a sharp acceleration of inflation, which for a time went above 20%.
=+ 2. British economists believe that the natural rate of unemployment in their country rose sharply during the 1970s, from around 3% to as much as 10%.
=+To a surge in commodities prices? Explain.
=+ 2. Which way does the short-run Phillips curve move in response to a fall in commodities prices?
=+Can there still be an inflation tax?
=+ 2. Suppose that all wages and prices in an economy are indexed to inflation—that is, wages and prices are automatically adjusted to incorporate the latest inflation figures.
=+What does this say about situations in which the classical model of the price level applies?
=+1. Suppose there is a large increase in the money supply in an economy that previously had low inflation.
=+ Why is deflation a problem for economic policy makers?
=+ Why can even moderate levels of inflation be hard to end?
=+ Why does the trade-off between inflation and unemployment cease in the long run?
=+ How does the Phillips curve describe the short-run trade-off between inflation and unemployment?
=+Why can printing money lead to high rates of inflation and hyperinflation?
=+ What are the implications of your answers for the effectiveness of monetary policy in influencing real GDP in the short run and the long run?
=+ Which market does so in the long run?
=+ Which market determines the interest rate in the short run?
=+2. Contrast the short-run effects of an increase in the money supply on the interest rate to the long-run effects of an increase in the money supply on the interest rate.
=+WORK IT OUT Interactive st help with ing this problem can be found online.
=+Using a figure similar to Figure 304-1, explain how the money market and the loanable funds market react to a reduction in the money supply in the short run.
=+rise in the long run. Label the vertical axis “Aggregate price level” and the horizontal axis “Real GDP.”
=+in the short run.c. Suppose that in 2022 the economy is at potential output but that this is somehow overlooked by the Fed, which continues its monetary expansion. Demonstrate the effect of the
=+illustrates the mechanism. Label the vertical axis “Interest rate” and the horizontal axis “Quantity of money.” Your graph should show two interest rates, 1 and rp.b. Explain why the
=+5.25% to a rate between zero and 0.25%. The idea was to provide a boost to the economy by increasing aggregate demand.a. Use the liquidity preference model to explain how the Federal Open Market
=+Federal Open Market Committee of the Federal Reserve, between September 18, 2007, and December 16, 2008, lowered the federal funds rate ina series of steps froma high of
=+14. Because of the economic slowdown associated with the 2007-2009 recession, the
=+b. Compare the long-term and short-term interest rate before and after the Great Recession.this problem can be found onlin
=+a. How does the relationship between the effective federal funds rate and the Taylor Rule change throughout the Great Recession?
=+2B. EW Access the Discovering Data exercise for Chapter 30 Problem 13 online to answer the following questions.
=+investment spending even when interest rates fell. How did this limit the potential for monetary policy to help alleviate the Depression?
=+12. During the Great Depression, businesspeople in the United States were very pessimistic about the future of economic growth and reluctant to increase
=+In which economy will changes in the money supply be a more effective policy tool? Why?Buddy Mays/Alamy
=+investment spending and the aggregate demand curve. The economies of Albernia and Brittania have very different money demand curves, as shown in the accompanying diagram.
=+11. The effectiveness of monetary policy depends on how easy it is for changes in the money supply to change interest rates. By changing interest rates, monetary policy affects
=+monetary policy would be conducted during recessions. Analyze both the case of a recession that is the result of a demand shock and the case of a recession that is the result of a supply shock.
=+that monetary policy can make to achieve a favourable economic environment and a high level of employment.” If price stability is the only goal of monetary policy, explain how
=+10. According to the European Central Bank website, the treaty establishing the European Community “makes clear that ensuring price stability is the most important contribution
=+law requiring the central bank to use monetary policy to lower the unemployment rate to 3% and keep it there. How
=+b. What will happen to the interest rate in the long run? g. An economy is in long-run macroeconomic equilibrium with an unemployment rate of 5% when the government passes a
=+explain what will happen to the interest rate in the short run.
=+8. Suppose that the money market in Westlandia is initially in equilibrium and the central bank decides to decrease the money supply.a. Using a diagram like the one in Problem 7,
=+% ‘Quantity et money rugmanvill, Macroeconomics, Se, © 2018 Worth Publishers
=+of 1, then as the economy slides into recession, how should the central bank react? Using your diagram from parta, demonstrate the central bank’s reaction.‘no,
=+happen to the interest rate if the central bank of Eastlandia keeps the money supply constant at —h.b, If the central bank is instead committed to maintaining an interest rate target
=+7.In the economy of Eastlandia, the money market is initially in equilibrium when the economy begins to slide into a recession.a. Using the accompanying diagram, explain what will
=+How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inflationary gap?Aggregate = ws level 1 Sted‘ADs
=+6. An economy is facing the inflationary gap shown in the accompanying diagram. To eliminate the gap, should the central bank use expansionary or contractionary monetary policy?
=+How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the recessionary gap?tras ‘Agaregate price level
=+5. An economy is facing the recessionary gap shown in the accompanying diagram. To eliminate the gap, should the central bank use expansionary or contractionary monetary policy?
=+rate on the 2-year note?
=+b. How do the interest rates on the 2-year and 10-year notes relate to each other? Why is the interest rate on the 10-year note higher (or lower) than the interest
=+list of Recent Note, Bond, and TIPS Auction Results to answer the following questions.
=+4. Go to www.treasurydirect.gov. Under “Individuals,” go to “Treasury Securities & Programs.” Click on “Treasury notes.” Under “at a glance,” click on “rates in recent
=+b. Go to the website of your favorite bank. What is the interest rate for one-year CDs?c. Why are the rates for one-year CDs higher than for 52-week Treasury bills?
=+recent auctions.” What is the investment rate for the most recently issued 52-week T-bills?
=+“Treasury bills.” Under “at a glance,” click on “rates in
=+d. The Fed engages in an open-market purchase of U.S. Treasury bills. 3.a. Go to www.treasurydirect.gov. Under “Individuals,” go to “Treasury Securities & Programs.” Click on
=+electronic payment systems that allow more consumers to use PayPal and Apple Pay to make purchases.
=+a There is a fall in the interest rate from 12% to 10%.b. Thanksgiving arrives and, with it, the beginning of the holiday shopping season.c. Increasingly, merchants are adopting
=+whether there is a shift of the demand curve or a movement along the demand curve and its direction.
=+2. How will the following events affect the demand for money? In each case, specify
=+United States? How does it describe the U.S. economy?
=+previous FOMC statement? If yes, by how much does it differ?c. Does the statement comment on current macroeconomic conditions in the
=+b. Is the target federal funds rate different from the target federal funds rate in the
=+a. What is the target federal funds rate?
=+Access the Discovering Data exercise for Chapter 30 Problem 1 online to answer the following questions.
=+3. How might future actions by the Federal Open Market Committee affect the future of PayPal and similar services?
=+How does this situation play into the PayPal story, and how does it fit into the broader pattern of monetary history?
=+ 2. In 2010, only around 25% of mobile phones in the United States were smartphones. In 2017, that number increased to more than 80%.
=+1 PayPal accounts aren’t counted as part of the money supply. Should they be? Why or why not?
=+c. Interest rate
=+a. Aggregate outputb. Aggregate price level
=+1. Assume the central bank increases the quantity of money by 25%, even though the economy is initially in both short-run and long-run macroeconomic equilibrium. Describe the effects, in the short
=+ 2. In setting monetary policy, which central bank—one that operates according to a Taylor rule or one that operates by inflation targeting—is likely to respond more
=+e. Aggregate output
=+d. Consumer spending
=+c. Investment spending

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