|
Describe the multiplier process.
What role does the mpc play in the multiplier process?
Explain under what conditions AS is flat, vertical and upward sloping, in the AD/AS model.
Explain why the AD curve has a downward slope.
Describe the difference between an inflationary gap and a deflationary gap.
Assume the mpc = 0.8. What does this value tell us? What proportion of income is saved in this case? Calculate the expenditure and tax multipliers for this mpc. Explain what happens to the level of spending and saving as well as the values of the expenditure and tax multipliers if the mpc value changes to 0.9.
Given Yfe = 2000, Y* = 1600, mpc=0.6, draw an AD/AS model indicating the size and type of gap, calculate the change in GDP necessary to close the gap, calculate Kg and Kt and the change in G or T necessary to close the gap.
Given Yfe = 2200, Y* = 2400 and mpc = 0.7 do the same as the problem above.
Describe what we mean by the term ‘Fiscal Policy”. Discuss the pros and cons of using fiscal policy to bring the economy out of a recession or to reduce the rate of inflation.
Describe the process of deposit expansion.
Describe the functions of the FED.
Describe each of the quantitative tools of the FED and explain who each would be used to contract the money supply as well as to expand the money supply.
Explain the three step process where by monetary policy influences the level or rate of growth of GDP.
Compare and contrast the relative strengths and weaknesses of both monetary and fiscal policy as means of either reducing the rate of inflation or increasing the rate of growth.
Describe the Phillip’s curve relationship. Explain the rationale underlying this relationship. Discuss the dilemma that this relationship poses for policy makers. Explain why this tradeoff worsened during the 70’s and 80’s and why it improved during the 90’s. What does this tell us about the role of supply side economics in the economy?
|