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Why might the Fed choose intermediate targets for its monetary policy, as opposed to directly pursuing its ultimate targets?
What might be the danger in using interest rates as targets for monetary policy when credit rationing is taking place?
Why does the Fed not stick more closely to its target paths for money? What are the dangers of targeting nominal interest rates?
How does the existence of the FDIC help prevent this problem? What would be the effects on the money supply and on the money multiplier?
Under what circumstances should the Fed conduct monetary policy by targeting mainly (a) interest rates or (b) the money stock?
Suppose fiscal policy actions are taken to put GDP at its potential level this period. What fiscal policy will be needed to put GDP on target next period?
Why might a pay-as-you-go social security system transfer resource from the young to the old? What are the consequences of such a system on economic efficiency?
To what extent do we need to worry about the national debt? In what way or ways is it a burden on society?
Classic hyperinflations have occurred in the aftermath of wars social upheavals. What factors lay behind the high rates of Russian inflation in the early 1990s?
How could the German government have financed the remaining 99 percent of its spending?
Evaluate strengths and weaknesses of gradual versus cold-turkey strategies of inflation reduction. Why is the credibility of anti-inflationary policy important?
What do Keynesians believe caused the Great Depression? Why are macroeconomists so interested in explaining the causes of the Great Depression?
Why is the fact that stock prices follow a random walk signal of stock market efficiency? What would have to true if stock prices did not follow a random walk?
What expectations must people have regarding future interest rates? Why might the above relationship signal a recession? Why might it not?
What do such high returns imply about the market's expectations regarding the future profitability of U.S. firms?
What will happen to the relative value of this period's versus next period's dollar-peso exchange rate?
What will happen to the bond's price? If you happened to be holding this bond, would this help you, hurt you, or not affect you at all?
Suppose the interest rate on the 10-year bond is 12 percent and that the interest rates on 1-year bonds. What must the term premium be on the 10-year bond?
Explain why an increase in U.S. interest rates relative to Canadian interest rates would affect the U.S.-Canadian dollar exchange rate.
Why might the above relationship signal a recession? Why might it not? What will the yield curve for this problem look like?
How well did the Fed anticipate the economic performance of 2010? Explain why economic forecasts are not totally accurate.
Calculate the share of investment in GDP ( IGDP 100). On average, what is the share of investment spending in aggregate demand in the European Union?
What will the rate of investment be in the first year after expected income changes? In the second year?
Should this firm invest (net) in more physical capital? Would your answer change if replacement cost of its physical capital stock at this time was $25 million?
What is the effect of this tax measure on investment in the long run? What is the effect in the current year and in the following year?