Problem 1: What is the (pure) expectations theory of the yield curve? Now suppose that inflation is expected to be unusually high this year and next year. According to this theory, would we expect the yield curve to slope upwards or downwards?
Problem 2: If the private sector in an open economy reduces its debt, what are the possible offsets? How would your answer change if the private sectors in most of the world are to reduce their debt at the same time?
Problem 3: What is the difference between net national saving and the trade balance? What would a negative Current Account position of the Balance of Payment imply in terms of the country's net indebtedness position?
Problem 4: Assume a flexible exchange rate regime and an economy that that imports oil as both a final and intermediate good. Explain and illustrate with the AD/AS model (with inflation on the vertical axis) how an increase in global oil price can affect the rate of inflation of this economy if its imports are inelastic (i.e., the Marshall-Lerner condition does not hold). Explain how the increase in the global oil price could affect the international net indebtedness position of this economy.