Question 1

The United States is approaching federal government debt as a percent of GDP at levels not seen since WW II. First, briefly explain the major concern - for your grandchildren - of the historically large federal debt. Second, briefly explain what would have been the major concern - for your grandchildren - if the massive increase deficit spending had not occurred over the last few years, in response to COVID. Keep your total answer to under 50 words.

Question 2

Briefly describe, in layman's terms how the fiscal multiplier model works.

Question 3

In January 2022, the Federal Reserve announced that it would begin increasing the target Fed Funds interest rate. Why did the Federal Reserve decide to do this? In your answer, please discuss at least three macroeconomic indicators that contributed to this decision.

Question 4

Briefly describe, in terms of the AS-AD framework where you think the economy is today. Where are the SRAS and the AD curves intersection with respect to the LRAS: is there a positive or negative output gap and what are the indications of this? Is the upward or downward price pressure and what major factors are contributing to this?

Question 5:

One of the long-held maxims of monetary policy was that negative nominal interest rate were not possible. Briefly explain, why this was believed to be the case.