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How would you explain the phrase time is money? Which constraints on people are time banks trying to ease? Try to find some UK examples of time banks.
What limits currently exist on the amount of credit that can be obtained by households?
What comprises the wealth of: (a) households? (b) firms? What is the significance of the word ‘ready' in the term ‘ready money'?
Memory test: What are hysteresis effects? Where are they mentioned in this chapter? What point is made in relation to them?
What factors are likely to determine leadership within a fixed exchangerate system? What meaning or meanings might be attached to the notion of the equilibrium?
Why might a revaluation of a currency only temporarily reduce a Balance of Trade surplus? Why does a wide band around fixed exchange rate parities make life?
Explain the view that inflation targeting in practice means the targeting of the central bank's inflation forecast rather than the rate of inflation itself.
Why does the ability of the MPC of the Bank of England to set its own policy horizon give it some goal independence?
Outline the arguments against discretionary macroeconomic policy. Explain the difficulties that confront the use of this rule in practice.
What costs might be incurred in the short-run and why might these fall upon those who may not benefit from a long-run reduction in inflation?
Why should central bankers be particularly adverse to inflation? How are the following arguments discussed in this chapter affected, if at all by an assumption?
How then can hysteresis occur in labour markets? How can the existence of hysteresis in labour markets be used to argue against the neutrality of money?
Why was the shoe leather cost of inflation so called? What other costs are there of anticipated inflation?
Why is the natural rate of unemployment referred to as natural? Explain the basis of Milton Friedman's simple rule of monetary policy.
How far ahead do people typically look in making market decisions? Provide examples of different forms of market behaviour in this regard.
Draw IS/LM diagrams with differently sloped LM curves and consider the impact in your diagrams of assuming different slopes.
The text describes consols (non-maturing bonds) as relatively illiquid- relative to money. Why are they ‘relatively illiquid'?
What difference would it make to the strength of UK monetary policy if all mortgages were fixed-interest-rate loans (a) in the short run; (b) in the long run?
How might the impact of a change in UK interest rates be affected by demand conditions in the USA and the expected future policy of the Federal Reserve Board?
What is implied about the relationship between money and interest rate when money is made independent variable? When the demand for money function is inverted?
Why is the income effect characterized as a parallel shift of the intertemporal budget line?
According to the precepts of behavioral economics, do you think these measures could have a significant impact on the U.S. savings rate?
Evaluate the impact of an unexpected decrease in your income after you retire according to the life-cycle hypothesis.
Which country should have a higher average propensity to consume? How can you explain the relatively low levels of saving of rich countries?
Calculate Nicole's average propensity to consume when she is fifteen, twenty-five, and fifty (assuming autonomous consumption is $20,000).