Questions:
1. Describe the behavior of consumption, investment, labor, productivity, wages, the price level and the money supply over the business cycle both in terms of correlation, magnitude and lead vs lag. Give the economic intuition behind the results on consumption, productivity, wages and price levels. For some of these rather than the intuition you should explain the importance of this evidence in terms of supporting/rejecting various theories.
2. Why in your opinion does the US government measure both a GDP deflator and a CPI? Historically how have the two behaved. If you had to measure a nominal amount of spending to see how it changed over time in real terms, which would you use?
3. How would you distinguish price increases from productivity increases in the cell phone industry if you were a statistician? Why might you be asked to do this? Be as specific as possible about the method you would employ
4. Suppose an individual has 60 hours to work. Suppose also the individual has a net wealth outside the labor market of 300$. Suppose the wage rate is equal to 100 $ per hour. Graph the budget constraint. Suppose the marginal rate of substitution between consumption (C) and leisure (l) is equal to c/l . What will the consumer's choice of labor versus consumption be. Suppose the wage falls to 50 $ per hour. What is the consumer's new choice of labor and consumption? Consumption? Interpret this in terms of substitution and income effects using a graph.
5. what does coyle mean by the phrase " taking risk is not a valuable service to the rest of the economy though managing risk is" ? why does the author believe (and mention) that risk taking is not the sepcial activity of banks? What role does leverage play in these issues?