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According to the quantity theory, what will happen to nominal GDP if the money supply increases by 5 percent and velocity does not change?
In the Homework Xpress! graph for this problem, sketch a curve illustrating the relationship between the interest rate and the demand for money.
Identify the rate of interest at which people would hold this quantity of money. Illustrate the effect of an increase in the supply of money by the Fed.
Active Versus Passive Presidential Candidates) What were the main differences between candidates Bush and Clinton in the 1992 presidential campaign?
Describe the different policy trade-offs implied by the short-run Phillips curve and the long-run Phillips curve. What forces shift the long-run Phillips curve?
Discuss how could such expectations put pressure on officials to pursue expansionary policies even if they hadn't planned to?
Some economists call for predetermined rules to guide the actions of government policy makers. What are two rationales that have been given for such rules?
What is policy credibility and how is it relevant to the problem of reducing high inflation? How is credibility related to the time-inconsistency problem?
Prior to that, observers were left to draw inferences about Fed policy based on the results of that policy. What is the value of this greater openness?
(Review of Policy Perspectives) Why might an active policy approach be more politically popular than a passive approach, especially during a recession?
Analyze what variable naturally adjusts in the labor market, shifting the short-run aggregate supply curve to restore unemployment to the natural rate?
Use an AD-AS diagram to illustrate and explain the short-run and long-run effects on the economy of the given situation.
In what sense is the executive branch of the U.S. government always dealing with three budgets?
Why does the budget require a forecast of the economy? Under what circumstances would actual government spending and tax revenue fail to match the budget.
Illustrate the effects if firms and workers do not believe that the Fed will maintain a price level of 120 but Fed does not increase money supply as expected.
Illustrate the short-run effects if the Fed unexpectedly pursues an expansionary monetary policy. Then show the long-run effect.
In the diagram, use aggregate demand and short-run and long-run aggregate supply. Illustrate how the gap would close in the long run using an activist approach.
Then illustrate how the gap would close in the long run if the economy is self-correcting.
How much independence do those banks have? To what extent are their functions and goals similar to those of the U.S. Federal Reserve System?
Choose a Fed governor or a regional Reserve Bank president and try to determine whether that person leans. What specific policy views does that person advocate?
If that inflation rate is unacceptably high, how can policy makers get the inflation rate down? Would rational expectations help or hinder their efforts?
Describe the short-run effects on prices, output, and employment of an increase in the money supply that is correctly anticipated by the public.
In earlier chapters, we've seen that government can increase GDP in short run by running a budget deficit. What are some long-term effects of deficit spending?
Why are the Social Security and Medicare programs headed for trouble? When will the trouble begin? What possible solutions have been proposed?
How is the U.S. budget deficit related to the trade deficit? Why did the federal budget go from a huge deficit in 1992 to a surplus in 1998?