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Explain the effect on wages, the employment-population ratio, and unemployment - all for the overall economy.
Suppose the U.S. unemployment rate at the start of 2010 had been 6% instead of 9.7%. How many more people would have been working?
What is the difference between the natural rate of unemployment and cyclical unemployment? How are these related to structural and frictional unemployment?
Is the unemployment rate in Europe today higher or lower than in the United States? What about hours worked per person?
In the past 50 years, both the fraction of hours worked by college graduates and the relative wage of college graduates have gone up. Why?
Suppose the government decides to reform tax system to reduce income tax rate. Explain the effect on wages, the employment-population ratio, and unemployment.
Explain the arguments for and against each reform. The insurance payment be increased so that it replaced 100% of a worker's regular labor income for 26 weeks.
What is the difference between a real interest rate and a nominal interest rate? What is the intuition behind the Fisher equation?
What is the government budget constraint? How does it help us understand the causes of high inflation?
How can we understand the Great Inflation of the 1970s? Does the government budget constraint help?
What is the key endogenous variable in the quantity theory? Explain the effect on this key variable of the following changes: The money supply is doubled.
What is the rate of inflation in this baseline case? Back to the baseline case, suppose real GDP growth rises to 5% per year.
Explain what you would do to the money supply in response to the Real GDP increases by 4% during a boom.
What is the nominal return associated with an investment in capital, and why? What is the Fisher equation in this example?
Can the real interest rate be negative? In what circumstances? Can the nominal interest rate be negative? Discuss.
Over the next 5 years, which economy do you think suffers a higher cost of inflation, and why?
Hyperinflations: Explain some of the costs of hyperinflations. If they are so costly to an economy, why do they occur?
The complete version of the Thomas Sargent quote that began this chapter. Why did Sargent include the modifiers persistent high?
How much currency was in circulation in 1981? What was the size of the monetary base in 1981?
How much revenue, as a share of GDP, would the inflation tax raise in the following episodes? Assume the growth rate of real GDP is 2% in these calculations.
Read the interview with Anna Schwartz, and explain what you think was the main contribution of this book.
How do the long-run model and the short-run model fit together? What is the purpose of each model?
When was the largest recession of the past 50 years, and what was the cumulative loss in output over the course of the slowdown?
What are some examples of changes in the economy that would cause the labor supply curve to shift? What might shift the labor demand curve?
What explains the general rise in the employment-population ratio in the United States? By how much did the ratio decline around the last recession?