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Using the theory of purchasing power parity, explain how inflation impacts exchange rates.
Illustrate the short-run effects on prices, output, and employment of an increase in the money supply that is correctly anticipated by the public.
Problems with Active Policy Use an AD-AS diagram to illustrate and explain the short-run and long-run effects on the economy of the following situation.
What were the main differences between candidates Bush and Clinton in 1992 presidential campaign? Illustrate ideas using the aggregate supply and demand model.
Describe the different policy trade-offs implied by the short-run Phillips curve and the long-run Phillips curve. What forces shift the long-run Phillips curve?
Why is it hard for policy makers to decide whether the economy is operating at its potential output level? Why is this uncertainty a problem?
What happens to the AFC per paper, the MC per paper, and the minimum amount that you must charge to break even on these costs?
How could such expectations put pressure on officials to pursue expansionary policies even if they hadn't planned to?
Should laws regarding marriage, divorce, and separation be harmonized across all states?
Some economists call for predetermined rules to guide the actions of government policy. What are two contrasting rationales that have been given for such rules?
What is policy credibility and how is it relevant to the problem of reducing high inflation? How is credibility related to the time-inconsistency problem?
Anticipating Monetary Policy In 1995, the Fed began announcing its interest rate targets immediately. What is the value of this greater openness?
Review of Policy Perspectives Why might an active policy approach be more politically popular than a passive approach, especially during a recession?
What variable naturally adjusts in the labor market, shifting the short-run aggregate supply curve to restore unemployment to the natural rate?
Compare what you read in the article to what you learned about the Federal Reserve in the chapter.
What does the article say about whether the Fed considers international economic conditions when setting U.S. monetary policy?
What will happen to money demand over time? If the Fed leaves the money supply unchanged, what will happen to the interest rate over time?
What basic assumption about the velocity of money transforms. What happens to the price level in the short run in each of these three situations?
If you were the production manager at BCAG, how would you justify the long-term nature of the contact with Thyssen Inc.?
What happens to velocity if the average price level falls to $2 per unit, the money supply is $2,000, and real GDP is 4,000 units?
Why should the Fed increase or decrease the money supply? If the Fed uses open-market operations, should it buy or sell government securities?
Using an AD-AS diagram, illustrate and explain the short-run and longrun impacts of an increase in the money supply.
What is the value of a forward contract in terms of the current stock price, the interest rate, the delivery time, and the delivery price
What is your average money balance during the pay period? How would each of the following changes affect your average monthly balance?
How specifically does this information affect your desire to sign a two-year contract with Toy Yachts R Us?