1. CPI & PPI Visit https://www.bls.gov and read the latest PPI and CPI figures. For PPI, you should be looking for the final demand index. Comparing these two numbers, what do you think we should expect in terms of near-term future inflation (hint: think about what these indices really represent. CPI corresponds to the price of the basket of goods paid by the consumer, while PPI shows how much producers are paying for the intermediate goods used in the process of production. Specifically, you should decide who is taking up the burden of inflation more, is it the consumers or the producers. After a short while, these two numbers should converge because whoever is paying for the higher prices will eventually pass It on to the other party). 2. New deal or NO deal? Before Covid, two major economic crises of the last century were the Great Depression of 1929 and the financial crisis of 2008-2009. In Both cases, the U.S. Economy was severely hit and entered a phase of prolonged recession. The federal government's response to these two events was radically different, however. The democrat Franklin D. Roosevelt introduced the "New Deal", a massive government spending program to boost economic activity in the aftermath of the 1929 depression. However, his distant successor, Barack Obama, followed a much more restrained "quantitative easing" approach inspired by the trickle-down economics of the post 1980 era. Firstly, I want you to briefly read up on these two approaches and identify some of their commonalities and differences. In particular, what were their effects on Aggregate demand and through what mechanisms (what components of AE) did they try to create that effect. Secondly, I want you to consider the social welfare implications of these two programs. Who were the winners and losers of these two policies? The rich or the poor? What were the effects they had on income inequality and the living standards in the U.S.? Based on this exercise, what do you think the relative weakness and strengths of these two programs and which one you think is a better approach? Please feel free to provide supporting charts, tables and other documents justifying your answers. Also, be sure to make your responses brief and concise while addressing the main points asked here.

3. Laughing all the way to the bank? Read up on the Glass-Steagall act of 1933. What was the main objective of that legislation? In 1999, then President Bill Clinton signed the Gramm-Leach-Bliley Act into law and effectively repealed

2 Glass-Steagall. Explain how this might have been among the contributing factors to the financial crisis of 2008. (hint: I briefly touched on what lead to the financial crisis of 2008. For more information look up "subprime mortgage crisis").

4. Fiscal policy The AD-AS model can be used to analyze the effects of fiscal policy, including changes in government spending or taxes. Suppose Congress votes to decrease corporate income tax rates. Use the AD/AS model to analyze the likely impact of the tax cuts on the macroeconomy. Show graphically and explain your reasoning. What exactly causes AD and/or AS to shift? What happens to GDP and the aggregate price level? Why?

5. Is the Fed out of Ammo? Since the end of the Great Recession, interest rates have been at historic lowsin some cases, close to zero. How is expansionary monetary policy, or more specifically an open market purchase, supposed to work? How do near-zero interest rates limit the ability of expansionary monetary policy to work? Couple this with your answer to question 1. Are there any risks associated with maintaining low interest rates in an inflationary environment? What are the trade-offs the central bank faces during a period when stagflation is a possibility? ( hint: currently the inflation rates in many parts of the world, including the U.S. and Canada, remain high while the initial post Covid recovery is coming to a halt, thus some economists fear that we might be on the verge of a stagflation period where recession and inflation occur at the same time).