Q5. Based on our discussions in class, which from the following list of policies the US government can initiate to improve the US economy would former Minneapolis Federal Reserve President Narayana Kocherlackota likely support:

A wide-spread tariff on foreign made goods to retain and restore jobsinindustries that requirelow and

semi-skilled workers. Jobs in theseindustries have been lost or in decline the last 20years, due to

foreigncompetition.

Shovel-ready government jobs specifically aimed at putting unemployed low-skilled people back to work.

Tuition tax credits and government training programs to retrainunemployed people and individuals that have left the labor market because their skills don't match the kinds of skills firms are looking for in workers.

Retaining the Trump era tax cuts for individuals making over $400,000 to avoid a decrease in AD & possibly AS.

Quantitative easing by the Federal Reserve (i.e., QE2), which willlowerinterest rates and raise

Aggregate Demand (AD), therebyincreasing output.

Q6. The adverse impact of a negative aggregate demand shock is reduced when the government does not target the government deficit (e.g., by requiring the government run to a balanced budget) because

targeting the deficit causes further negative aggregate demand shocks.

negative aggregate demand shocks do not affect the deficit.

not targeting the deficit causes positive aggregate demand shocks.

the economy is always producing potential output.

The statement is not true.Targeting the deficit is always beneficial, especially when the economy experiences an adverse aggregate demand shock.

Q7. The economist expressed concern about the prospects of short-run economic growth."Growth in GDP leads to higher inflation - we should be mindful of this and take policy measures to curb that possibility." The economist links

short-run growth to either an increase in aggregate demand or an increase in aggregate supply.

short-run growth to an increase in people's willingness to work.

short-run growth with a decrease in aggregate demand.

short-run economic growth with an increase in aggregate demand

short-run growth with an increase in aggregate supply.

Q8. The ability of the government to stimulate the economy by fiscal spending (increase in G) is limited

if there is a large pool of discouraged workers no longer in the labor force.

if wages are fixed above the market -clearing wage, or are sluggish to adjust to

changes in the labor market, since people will only want to work more if they are paid more money.

if there is a large pool of unemployed workers.

people perceive that the increase in government spending represents a future tax

liability and decide to save more now.

if the government restricts its spending to domestically produced goods only,

rather than goods produced here and abroad.

Q9. " 'With all due respect', the congresswoman said, 'my colleagues on the right arewrongabout the Affordable Care Act and its effect on the natural rate of output. The reason? In a term -job lock.The ACA allows workers the freedom to depart from working environments they have long desired to leave but could not for fear of losing their health insurance, and this will have a positive impact on the nation's long run level of output, not to mention their overall health over their working careers.' "

One can infer the congresswoman believes

under the new law, family members will no longer need to take time off work to care for long-term, elderly family members.

workers will take advantage of the new law to follow their passions.

under the new law, more people will find employment in the health-care sector.

Job-lock is good for the economy and leads to higher levels of output.

the law will generate greater job-turnover in the labor market, which in turn will create better matches between workers and firms, and consequently, raise national output.