Read this case: https://services.hbsp.harvard.edu/api/courses/815669/items/721014-PDF-ENG/sclinks/2c07fbcdc34152fdd48f87430aa56b41

Answer the questions, see exhibits below

1. Panel A of Exhibit GA2 shows that the drastic decline in real output during the Maduro years was due mainly to a fall in MFP M. Give some

likely explanations of this decline, based on the case and on our discussions of the drivers of MFP M.

2. In Exhibit BOP1, NX goes from positive in 1999-2014 to negative in 2015, while -?NFA goes from negative in 1999-2014 to positive in 2015.

Is this consistent with a sudden stop? Why or why not? (What is a sudden stop?)

3. Exhibit MA1 shows downward trends in c and ? combined with an upwards trend in r over the period from 2010 to 2019. Is the downward trend in ? due to the decline in c, the rise in r, or both? Explain your answer.

4. Exhibit MA3 shows that Venezuela sharply raised the reserve requirement (minimum permitted reserve ratio) several times over the

past decade. Give a plausible reason for Venezuela to have done this. (Hint: it is related to the quantity equation, not to bank runs.)

5. Based on Exhibit QE2 and panel A of Exhibit QE1, what drove the rise in the inflation rate in 2018? What drove the decline in inflation in

2019?

6. Based on Exhibit QE3 and panel B of Exhibit QE1, what drove the rise in the money growth rate gM in 2018? What drove its decline in 2019?

7. Based on Exhibits QE1-QE3, how do you know that an inflationary spiral was underway in 2018? What put a stop to this spiral in 2019?