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Why did the federal budget go from a huge deficit in 1992 to a surplus in 1998? Explain the factors that contributed to the turnaround.
Is it true that international trade tends to equalize prices of goods and services around the world?
Is it possible for U.S. federal budget deficits to crowd out investment spending. How could German or British investment be hurt by large U.S. budget deficits?
If Dell agrees to purchase 3 million hard drives at price P*=$30.2/unit and renegotiates to only purchase for $26.8/unit, how much Dell profits?
Explain the differences among an annually balanced budget, a cyclically balanced budget, and functional finance. How does each affect economic fluctuations?
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?
What is the size of the government deficit (or surplus) at this output level? What is the size of net exports at the level of real GDP demanded?
Is the same true of lowering the discount rate? What would happen if the Fed bought U.S. bonds from, or sold them to, the banking system?
Though not discussed in the text, Fannie Mae and Freddie Mac played important roles in 2008 financial crisis. What does the Overview says about these agencies?
Bank Deregulation Some economists argue that deregulating the interest rates that could be paid on deposits. On what basis do economists make such an argument?
What is a depository institution, and what types of depository institutions are found in the United States?
Fiat Money Most economists believe that the better fiat money serves as a store of value, the more acceptable it is. How could people lose faith in money?
Why do you think rice was chosen to serve as money in medieval Japan? What would happen to the price level if there was particularly good rice harvest one year?
Why is universal acceptability such an important characteristic of money? What characteristics can you think of that might be important to market participants?
Functions of Money If an economy had only two goods (both nondurable), there would be no need. What important function of money does this statement disregard?
What is the natural rate of unemployment? Where is the economy operating relative to its potential GDP?
Do such shocks affect the short-run aggregate supply curve, the long-run aggregate supply curve, or both? What is the resulting impact on potential GDP?
Long-Run Adjustment In the long run, why does an actual price level that exceeds the expected price level lead to changes in the nominal wage?
What are some explanations for the coordination failures that prevent workers and employers from reaching agreements?
What does it imply about actual price level relative to expected price level? What must happen to real and nominal wages in order to close a recessionary gap?
In interpreting the short run aggregate supply curve, what does the adjective short-run mean? Explain the role of labor contracts along the SRAS curve.
Explain why recessionary gaps occur only in the short run and only when the actual price level is below what was expected.
Discuss some instances in your life when your actual production for short periods exceeded what you considered your potential production.
Potential Output Define the economy's potential output. What factors help determine potential output?
Short-Run Aggregate Supply In the short run, prices may rise faster than costs. How would such adjustments affect the slope of the aggregate supply curve?