1) Assume that M is $500 billion in V is 5. What is the level of nominal...
Question:
1) Assume that M is $500 billion in V is 5. What is the level of nominal GDP according to the monetarist equation? If V rises by 10%, then according to the monetarist equation, what will be the new level of nominal GDP?
2) Assume that M is $200 billion and V is six. If V increases by 15%, what will be the change in nominal GDP?
3) What are the four different views of the causes of macroeconomic instability in the economy?
4) Compare and contrast the new classical and main stream view of self correction in the economy.
5) Compare and contrast the views of new classical economists and mainstream economists on the issue of policy rules versus the use of discretionary monetary and fiscal policy.
6) What are "coordination failures" and why are they important for interpreting the macro economy?
7) Explain the new classical view of self correction in the economy. What are the strengths and weaknesses of this view?
8) What rationale does rational expectations theory provide for the ineffectiveness of discretionary policies?