Revised on 8-20 Monetary and fiscal policy are government attempts to smooth the business cycle, especially the use of expansionary policies to return to GDP
Revised on 8-20 Monetary and fiscal policy are government attempts to smooth the business cycle, especially the use of expansionary policies to return to GDP growth from a recession. The goals are relatively short-term, not more than 5 years. Long-term growth, however, is arguably more important and the subject of the last section of the course. 1. If natural resources are ultimately finite, does this imply that there is a limit to per capita GDP? Explain. 2. Explain why developing economies can sustain higher GDP growth rates than the developed economies (example: China versus the United States). 3. Discuss one way in which government can promote economic activity and one government action that would harm long-term RGDP growth. 4. A large, economically developed country produces all goods and services more efficiently than a smaller developing country. Can both countries benefit from trade? Explain. 5. Should the national government ensure income equality through taxation and wealth redistribution? 6. During a recession, politicians and economists often speak of returning the nation to full employment. Does this mean zero unemployment? If not, why isn't zero unemployment desirable?7. Mexico and Canada are the largest trading partners of the US. USMCA trade agreement provides for relatively free trade. Should the Law of One Price prevail in major tradable consumer goods sold the three countries? What about services? Explain. 8. Venezuela has financed much of its government expenditures with an ever-increasing money supply ("printing money") and as also suffered from surging inflation. Use the equation of exchange to explain the cause and effect. 9. Can monetary and/or fiscal policy cause long-term growth
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