1. What do monetarists think are the short-term effects and the long-term effects of using discretionary monetary policy to smooth out economic fluctuations caused by the business cycle? What is their advice for controlling the money supply?
2. What is meant by stagflation? What economic circumstances might lead to a period of stagflation? In terms of the AD/AS model and/or the Phillips curve model, explain what is necessary to end a period of stagflation.
3. What is the difference between the financial account and the current account? What does each show (the main categories) and how are the two accounts related?
4. Discuss the impact of several years of large federal government budget deficits & an increasing national debt on international trade: How are today's interest rates, exchange rates, and the balance on goods and services affected by selling bonds to finance the federal government's budget deficits?
5. If the federal government was to begin running a budget surplus and paying down the national debt, how would exchange rates, interest rates and the balance on goods and services be affected by repayment of the national debt?