According to the Solow model, which type of government spending is more likely to raise the long-term growth rate of output per person, spending on infrastructure or spending on research and development?
1) According to the Solow model, which type of government spending is more likely to raise the long-term growth rate of output per person, spending on infrastructure or spending on research and development?
2) Many economic variables are classified according to their relation to the business cycle. What are the principal categories? Variables in which category(ies) are of greatest help in forecasting changes in the economy?
3) Why is the credit spread (the interest rate on corporate bonds minus the interest rate on government bonds) countercyclical and coincident?
4) Do you think that prices are more or less sticky today than 50 years ago? Explain why?
5) Assume that the economy is in equilibrium when the real interest rate rises. Explain, step-by-step, how the components of expenditure adjust to bring the economy to its new equilibrium.
6) Given the IS model does a dollar of government spending have a larger impact on equilibrium output than does a dollar of taxes. Explain.
7) In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy. Many refineries went offline disrupting oil refining and distribution. What do you think was a likely macroeconomic result? Refer to the AD/AS model.
8) In the 1960s and 1970s, research funding by the U.S. government and some universities led to revolutionary advances in network computing. These advances in communication and network technology remained largely isolated to governmental and academic use. By the mid-to-late 1990s, the Internet began to be widely adopted with massive increases in productivity (which journalists dubbed the “new economy”). Explain what happened referring to the AD/AS model.
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9) How might openness to the global economy influence the debate between policy activists and nonactivists?
10) Assume a negative supply shock hits the U.S. economy. An oil tanker bound for U.S. refineries gets stuck in the Suez Canal that block all traffic for at least a week. Describe step by step what happens to U.S. prices and output given the AD and AS were in equilibrium before the incident. What actions will the government take relative to monetary and fiscal policy and why?
11) What distinguishes a short-run versus a long-run supply shock? Why is equilibrium in the long-run dependent on government action? What happens when government intervenes relative to a short run supply shock?
12) Suppose that households and businesses increase autonomous expenditures, driving output well above potential. Describe, in detail, how monetary policy might react to minimize the increase in inflation.
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