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Assume that the following data characterize a hypothetical economy: money supply = $200 billion. What is the equilibrium interest rate? Explain.
What are the major strengths of monetary policy? Why is monetary policy easier to conduct than fiscal policy in a highly divided national political environment?
What change in the Federal funds rate would you recommend? How would your recommended change get accomplished?
Acording to the Taylor rule, in what direction and by how much should the Fed change the real Federal funds rate?
What do economists mean when they say that monetary policy can exhibit cyclical asymmetry? Why is this possibility significant to policymakers?
Are these rates higher or lower than they were 3 years ago? Have they increased, decreased, or remained constant over the past year?
Summarize the policy actions of the Board of Governors during the most recent period. In the Fed's opinion, how did the U.S. economy perform?
Suppose that the city of New York issues bonds to raise money to pay for a new tunnel linking New Jersey and Manhattan. What about the city of New York?
If the Federal Reserve has set the risk-free interest rate at 8 percent, what is the proper current price of this investment?
How do stocks and bonds differ in terms of the future payments that they are expected to make? Which type of investment is considered to be more risky?
Consider an asset that costs $120 today. You are going to hold it for 1 year and then sell it. At what price would the asset have a zero rate of return?
If investors care only about rates of return, what should happen to the share price of Rogue Designs?
What about an investor who puts all of his money into only a single risky stock? Can he properly ignore diversifiable risk?
What determines its vertical intercept? What determines its slope? And what will happen to an asset's price if it initially plots onto a point above the SML?
Which will have a larger increase in average expected rates of return, investments with high betas or investments with low betas?
Why is it so hard for actively managed funds to generate higher rates of return than passively managed index funds having similar levels of risk?
What is my future value worth today? That will get you to the present value calculator.) Why the large difference in present values in the two situations?
Do these results make sense given what you have learned? Should you be impressed that funds with risky portfolios generate high returns?
Which of the following statements are true? Which are false? Explain why the false statements are untrue.
Use the concept of the short-run Phillips Curve to explain why these policies might at first succeed.
What is the Laffer Curve, and how does it relate to supply-side economics? Why is determining economy's location on curve so important in assessing tax policy?
By how much does real GDP change? Are the decreases in real GDP caused by tax increases temporary or permanent? Does the intention of a tax increase matter?
What is an efficiency wage? How might payment of an above-market wage reduce shirking by employees and reduce worker turnover?
What concept does this example illustrate? How does this idea relate to macroeconomic instability?
By how much will nominal GDP have to fall to restore equilibrium, according to the monetarist perspective?