Assignment 4

The purpose of the Unit Exercises is to assess the student's ability to apply the economics concepts learned in the unit to practical problem-solving scenarios. Instructions Complete the questions below that are based on your chapter readings. Submit your answers in a Microsoft Word document (no PDFS) by 11:00 p.m. on Sunday of Unit 9 or as directed by your professor. 1. Suppose the government cuts transfer payments in an economy with an inflationary gap. How would this policy affect bond prices, interest rates, investment, the exchange rate, net exports, real GDP, and the price level? Show your results graphically. 2. Given the nature of the implementation lag discussed in the text, discuss possible measures that might reduce the lag. 3. Federally funded student aid programs generally reduce benefits by $1 for every $1 that recipients earn. Do such programs represent government purchases or transfer payments? Are they automatic stabilizers? 4. The text notes that changes in oil prices can affect the inflation-unemployment outcome. Explain what effect changes in oil prices may have on these two variables. Submission status Submission status No attempt Type here to search O 9 9 W