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Describe the Fed's balance sheet in normal times. How did it change during the financial crisis? Why?
What are three financial reforms that policymakers are considering to improve the functioning of the financial system?
What policy response would you recommend to the Federal Reserve? Analyze the effect of this shock in an IS/MP diagram.
What is the effect of these two shocks on inflation? Show this in a graph of Phillips curve. In late 1920s, average inflation rate was approximately zero.
In a half-page essay, explain the policy action and the rationale behind the policy. Also, discuss briefly a possible criticism of the policy action.
What action did the FOMC take, if any, regarding the level of the fed funds rate? Why did it make this choice?
What has happened to inflation, real GDP growth, and unemployment? What about a key policy interest rate set by the European Central Bank (ECB)?
Are TFP shocks a reasonable explanation for the business cycles we see in modern economies? Why and why not?
What key simplifying assumption allows us to use the labor market block of a DSGE model to study the immediate impact of shocks on economy in that framework?
What happens to the labor demand schedule? What is the effect on the real wage and employment in the short run?
What happens to the labor supply schedule? Why is the net effect on employment ambiguous? What happens to the real wage?
Analyze the effect of the shock in the labor market diagram of a standard DSGE model. How would your answer change if the decline in the VAT was permanent?
Summarize the reasons for the bankruptcy, whether the company is out of bankruptcy, and the results of the bankruptcy. What are your thoughts on the bankruptcy?
Construct the AD, SRAS, and LRAS curves for an economy experiencing (a) full employment, (b) an economic boom, and (c) a recession.
Using the AS/AD framework, explain the macroeconomic consequences of this shock, both immediately and over time.
Using the AS/AD framework, explain how the macroeconomy would evolve in response to these shocks.
Explain the macroeconomic consequences of a one-time negative shock to the inflation rate, as might occur because of a sharp decline in oil prices.
How does this rate compare with the current fed funds rate? If they are different, why do you think that's the case?
Why are inflation expectations so important to modern monetary policy? What are several ways that central banks try to manage inflation expectations?
Why does the economy take several periods before returning to its steady state following a shock?
Why does the AD curve slope downward? Why does the AS curve slope upward? How is the AS/AD graph like a standard supply-and-demand diagram? How is it different?
Are the effects possibly related to the fact that central banks in most countries express monetary policy in terms of a target for the nominal interest rate?
Suppose a large number of new immigrants enter the labor market. Use the short-run model to explain how the economy responds to this change.
With the goal of stabilizing output, explain how and why you would change the interest rate in response to the following shocks.
Your twin goals are to maintain low inflation and to stabilize economic activity - that is, to keep output. Why are these appropriate goals for monetary policy?