1.Explain why the longrun aggregate supply curve is vertical

2.Changes in the supply of money affect nominal variables, but not real variables. Discuss the validity of this statement

3.Why is wealth that is held in savings account not subject to a change in the inflation tax?

4.Suppose that a country's inflation rate increase sharply. Explain the following situations.

a. What happens to the inflation tax on the holders of money?

5.Using a designed curve draw and explain the Fisher effect

In the long run, "money is neutral. Explain

6.The shortrun aggregate supply curve slopes up explain why?

7.When the price level rises, the real value of savers' monetary wealth declines.

8. . In the general equilibrium model of chapter 3, Mankiw assumes that consumption is a function of disposable income alone: C = C(Y-T). Modify the consumption function to make consumption depend on both after tax income and the real interest rate. Explain why you think this might make sense.

a.Consider a drop in the world real interest rates (due to a decline in global demand for loans associated with the bursting of the Dot Com Bubble).

b.Explain the impact on real Savings and Investment in the U.S.

c.How do the results differ if consumption does not depend on the real interest rate?

d.Assuming no change in the rate of growth of money in the U.S., will the nominal interest rate change when the world real interest rate declines?

9. Suppose you have graduated with your economics degree and have been appointed to head the Ministry of Finance of a small open economy such as Thailand. The President of this small open economy has asked for your analysis of the impact of U.S. fiscal policy on your economy. George Bush has proposed that the U.S. government cut taxes and increasing federal spending on defense and homeland security. Provide a detailed explanation of the impact of these U.S. policy changes on your small economy. In particular, show graphically and fully explain (tell the story) the impact on:

a.The trade balance and net capital flows for your small open economy.

b.The real exch. rate between your economy and the U.S. currency.

c.Real consumption, investment and total output in your economy.

10 Compare microeconomics from macroeconomics