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Critically analyze and evaluate real-life economic problems and opportunities by applying economic concepts, principles, and theory.
Question: To what extent do you think that immigrant families should give up their customs to become part of their host country?
How does the Fed raise or lower that rate, and how is that rate related to other interest rates in the economy such as the prime rate?
Demand for Money If money is so versatile and can buy anything, why don't people demand all the money they can get their hands on?
Discuss the core principle of the standard and whether or not you are in agreement with the proposed standard.
Why has the Federal Reserve chosen to focus on the federal funds rate rather than some other interest rate as a tool of monetary policy?
Equation of Exchange Using the equation of exchange, show why fiscal policy alone cannot increase nominal GDP if the velocity of money is constant.
Discuss the effect of such clauses on both the government, and other customers, noting, inter alia, the effect on the selling firm's bargaining power.
Assuming the relationships hold true and given performance below, what salary would you estimate for each player in 2006?
What will be the equilibrium price? What will be the equilibrium output for the industry? For each firm?
Suppose that the Federal Reserve lowers required reserve ratio from 0.10 to 0.05. What are the money multipliers for required reserve ratios of 0.15 and 0.20?
What are the required reserves on this new deposit? What is the largest loan that the bank can make on the basis of the new deposit?
Federal Funds Market What is the federal funds market? How does it help banks strike a balance between liquidity and profitability?
What is the difference between the federal funds rate and the discount rate? What is the ultimate impact on money supply of an increase in the discount rate?
What three tools can the Fed use to change the money supply? Which tool is used most frequently? What are three limitations on the money expansion process?
Create money by making loans. How can commercial banks create money? Is the government the only institution that can legally create money?
Using the theory of purchasing power parity, explain how inflation impacts exchange rates.
Illustrate the short-run effects on prices, output, and employment of an increase in the money supply that is correctly anticipated by the public.
Problems with Active Policy Use an AD-AS diagram to illustrate and explain the short-run and long-run effects on the economy of the following situation.
What were the main differences between candidates Bush and Clinton in 1992 presidential campaign? Illustrate ideas using the aggregate supply and demand model.
Why is it hard for policy makers to decide whether the economy is operating at its potential output level? Why is this uncertainty a problem?
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. What are two contrasting 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?
Anticipating Monetary Policy In 1995, the Fed began announcing its interest rate targets immediately. What is the value of this greater openness?