ASSIGNMENT:
Complete all questions listed below. Clearly label your answers.
1. What impact will an unanticipated increase in the money supply have on the real interest rate, real output, and employment in the short run? How will expansionary monetary policy affect these factors in the long run? Explain.
2. How rapidly has the money supply (M1) grown during the past twelve months? State the rate of growth (use https://www.federalreserve.gov/releases/h6/) and the most recent release, use the seasonally adjusted figures. Calculate the rate of growth across the year by taking the (new amount of M1- old amount of M1)/old amount of M1). Given the state of the economy, should monetary authorities increase or decrease the growth rate of money? Explain why.
3. Is stability in the general level of prices through time important? Why or why not? Should price stability be the goal of monetary policy? Explain your responses.
4. Compare and contrast the impact of an unexpected shift to a more expansionary monetary policy under rational and adaptive expectations. Are the implications of the two theories different in the short run? Are the long-run implications different? Explain.
5. What impact do natural resources have on economic growth? Will it be possible for a country with few natural resources to grow rapidly? Why or why not.
6. Suppose you have just been appointed to a high level position in the economic analysis unit of the State Department. The secretary of state has asked you to prepare a memo describing the key policies and economic arrangements that a specific less developed country should follow in order to achieve rapid growth and higher income levels. During your research, you discover that multiple Christian aid organizations have been working in the country to assist the local population. Briefly describe your response (2-3 paragraphs). Be sure to indicate why each factor you mention is important if a nation is going to attain a high level of economic progress.
7. Using the most recent available rankings of Economic Freedom available at https://www.heritage.org/index/ranking, indicate five of the world's economies that are the most free. Using textbook information, indicate how income levels and growth rates of freer economies compare with those that are less free.
8. Has the United States become more or less economically free during the past decade? What impact will this have on the future economic growth of the United States?