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Explain why a currency depreciation leads to an improvement in country's trade balance. What were the benefits and costs of reversing that policy mix in 1990s?
Congress passed the series of tax cuts that President Bush had requested. What effect did this policy likely have on the U.S. trade deficit? Why?
Why do we say that deposits are liabilities of banks? During the financial crisis and recovery, stock market prices first fell by about 55 percent.
Give two different explanations of how the economy can suffer from stagflation. Why do you think wages tend to be rigid in the downward direction?
Which case gives rise to more inflation-the steep aggregate supply curve or flat one? What happens to the multiplier if the aggregate supply curve is vertical?
Explain the basic logic behind the multiplier in words. Why does it require b, the marginal propensity to consume, to be between 0 and 1?
Explain how this dollar will lead to a multiplier chain of increased income and spending. (Who received the dollar? What will he or she do with it?)
Explain the difference between final goods and intermediate goods. Why is it sometimes difficult to apply this distinction in practice?
Explain why permanent tax cuts are likely to lead to bigger increases in consumer spending than temporary tax cuts do.
Explain the logic behind the finding that variable imports reduce the numerical value of the multiplier.
Compute the real wage (money wage deflated by the price index) corresponding to each of the following possible price levels: 85, 95, 100, 110, 120.
Explain why a decrease in the price of foreign oil shifts the aggregate supply curve outward to the right. What are the consequences of such a shift?
Since 2008 a rash of bank failures has occurred in the United States. Explain why these failures did not lead to runs on banks.
What is fractional reserve banking, and why is it key to bank profits? Why fractional reserve banking give bankers discretion over how large money supply will?
How is money defined, both conceptually and in practice? Does the U.S. money supply consist of commodity money, full-bodied paper money, or fiat money?
Reduce capital gains taxes only on certain types of investments, such as corporate stocks and bonds. Which of the three options seems most desirable to you?
Which of the proposed supply-side tax cuts appeals to you most? Draw up a list of arguments for and against enacting such a cut right now.
How would GDP in the United States have been affected if this higher defense spending led to larger budget deficits?
The government then proposes to raise both spending and taxes by $100 billion. What should happen to equilibrium GDP on the demand side?
It seems to be a well-established fact that workers with more years of education typically receive higher wages. What are some possible reasons for this trend?
What are some reasonable goals for a union? Use the tools of supply and demand to explain how a union might pursue its goals, whatever they are.
The airline was, indeed, eventually forced to close down, costing many jobs. Discuss what might nevertheless have led the unions to hold out so tenaciously.
Why is it so difficult to define full employment? What unemployment rate should the government be shooting for today?
After 25 years, how much larger is Country B's economy than Country A's economy? Why is the answer not 25 percent?
Try asking a friend who has not studied economics in which year he or she thinks prices were higher: 1870 or 1900? Why do you think peoples have this opinion?