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What sorts of products do you think it is likely to produce? What are the characteristics of the countries with which you would expect it to trade?
You decide to swap six shirts for three pairs of shoes. Explain why you are nevertheless both likely to be better off.
Give one or more arguments for engaging in contractionary monetary or fiscal policies under these circumstances. Which arguments do you find more persuasive?
Explain why expectations of inflation affect the wages that result from labor-management bargaining.
What is a Phillips curve? Why did it seem to work so much better in the period from 1954 to 1969 than it did in the 1970s?
Explain the difference between crowding out and crowding in. Given the current state of the economy, which effect would you expect to dominate today?
Explain how the U.S. government managed to accumulate a debt of $12 trillion. To whom does it owe this debt? Is the debt a burden on future generations?
If the Federal Reserve lowers interest rates, what will happen to the government budget deficit?
Explain why lags make it possible that policy actions intended to stabilize the economy will actually destabilize it.
What will be the price ratio between the two commodities (that is, the price of oil in terms of wheat) in each country if there is no trade?
What should be the interest rate on the mortgage-backed security? What happens if the expected default rate rises to 8 percent?
Suppose, further, that Country X does not alter its trade practices in any way. Is the United States better or worse off? What about Country X?
What items do you own or routinely consume that are produced abroad? From what countries do these items come?
What, then, does the purchasing-power parity theory predict should have happened to the exchange rate between the mark and the dollar between 1980 and 1985?
How are the problems of a country faced with a balance of payments deficit similar to those posed by a government regulation that holds the price of milk?
Explain why the members of the Bretton Woods conference in 1944 wanted to establish a system. What flaw led to the ultimate breakdown of the system in 1971?
Why do you think the government of Japan was unhappy about this currency appreciation?
For years, the U.S. government has been trying to get Japan and the European Union. Explain how more rapid growth in Japan would affect the U.S. economy.
Explain why a currency depreciation leads to an improvement in country's trade balance. What were the benefits and costs of reversing that policy mix in 1990s?
Congress passed the series of tax cuts that President Bush had requested. What effect did this policy likely have on the U.S. trade deficit? Why?
Why do we say that deposits are liabilities of banks? During the financial crisis and recovery, stock market prices first fell by about 55 percent.
Give two different explanations of how the economy can suffer from stagflation. Why do you think wages tend to be rigid in the downward direction?
Which case gives rise to more inflation-the steep aggregate supply curve or flat one? What happens to the multiplier if the aggregate supply curve is vertical?
Explain the basic logic behind the multiplier in words. Why does it require b, the marginal propensity to consume, to be between 0 and 1?
Explain how this dollar will lead to a multiplier chain of increased income and spending. (Who received the dollar? What will he or she do with it?)