Impact of expansionary monetary policy in case of liquidity trap, calculation of real GDP, multiplier effect, AD / AS framework.
1. Graph and explain why expansionary monetary policy is ineffective in the liquidity trap?
2. Graph and explain what the expected economic outcomes are when the Fed lowers the discount rate and the target for the federal funds rate?
3. If the GDP deflator is 104.8 for 1999 and the GDP deflator is 107.3 in 2000, a nominal GDP in 2000 of $10,000 billion would mean that the real GDP in 2000 would be?
4. If nominal GDP is $6,225.6 billion and the GDP deflator is 134.7, then real GDP is:
5. If the CPI increases from 200 to 240 for one year, the rate of inflation for that year is:
6. Assume the MPC in an economy is 0.8, the APC is 0.8 and disposable income is $9 billion. If disposable income increases to $14 billion, illustrate what is the new level of consumption?
7. An MPS of 0.4 means a $50 million tax cut ultimately affects spending:
8. If the desired fiscal stimulus is $20 billion and the desired AD increase is $50 billion, we can conclude that the MPC is:
9. To eliminate an AD shortfall of $120 billion when the economy has an MPC of 0.8, the government should decrease taxes by:
10. If the anticipated inflation rate is 6 percent and the nominal interest rate is 8 percent, the real interest rate will be:
11. Suppose the MPC in an economy is 0.9, the APC is 0.8 and disposable income is $9 billion. If disposable income increases to $14 billion, what is the new level of consumption?
12. Explain and graph (using AD/AS framework) an example in today\'s news of fine tuning the economy.