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Monetary and Fiscal Policy and Policy Debate
1. Suppose you read in the newspaper that last week the Fed conducted open market purchases, and that on Tuesday of last week it lowered the discount rate. What would you say the Fed was up to? Describe the most likely economic condition of the economy.
2. What three tools can the Fed can use to change the money supply? Which tool is used most frequently? What are two limitations on the money expansion process?
3. Explain why incorporating money into our macroeconomic framework moderates the effects of fiscal policy. That is, how does the existence of the supply and demand for money moderate the effects of increased government spending?
In recent years, consumption spending by households has accounted for about 70% of the total spending (aggregate demand) in the U.S. economy.
Create another diagram; once again start from an initial macroeconomic equilibrium. Explain both the SR and LR impact of a contractionary AS shock on Y. Use the appropriate diagrams and provide a brief real world example of this type of shock.
Explain why the Fed must normally add reserves to the banking system via open market operations, on most days, in order to maintain its interest rate target in the federal funds market.
What is the equilibrium level of income? Compute disposable income, consumption and aggregate demand.
List the four assumptions for the Monopolistic competition model. Now explain how the market will adjust in the long run and draw a corresponding graph for the representative firm in the long run. (Explain your answer.)
Suppose a monopolist with cost function C (Q) = 3Q selling to 2 segments of consumers where Q is total output produced by the monopolist in both markets. If the monopolist can use a single two-part tariff, compute the two part tariff that will maxim..
Illustrate what are the impacts of an easy monetary policy on the price-level and real output
Draw the demand curve for the bridge crossings. How many people would cross the bridge when there were no toll? What is the loss of consumer surplus associated with charge of toll of $4.00
Firms supply. Credit Check, Inc., offers credit checking services to credit card companies and retailers. What is the minimum price necessary for the firm to supply one thousand credit checks?
You have been hired as a plant manager for a firm that produces widgets (Q) in Angola, Indiana. Widget production requires machine time (K) and labor time (L).
For each of the following concepts provide a definition, a complete explanation as to their significance, and a practical example.
How many "spells" of unemployment occur each year in this economy? What percentage of the "spells" are only one month long?
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