Policy makers have identified low and stable inflation as a
goal. Offer 3 reasons for this...
Policy makers have identified low and stable inflation as a
goal. Offer 3 reasons for this goal (specifically address
theories/concepts from this module). Bold key concepts and/or
theories.
Let the US economy be characterized by low aggregate output and
low and stable inflation. Then, provide a clear definition of the
Phillips Curve and consider whether this initial state is
consistent with what is shown by this empirical relationship.
Conclude by discussing under what conditions expansionary fiscal
and monetary could lead to demand-pull inflation. How is economic
growth impacted?
Let the US economy be characterized by low aggregate output and
low and stable inflation. Then, provide a clear definition of the
Phillips Curve and consider whether this initial state is
consistent with what is shown by this empirical relationship.
Conclude by discussing under what conditions expansionary fiscal
and monetary could lead to demand-pull inflation. How is economic
growth impacted?
Persistent low inflation and interest rates
a) What factors have contributed to persistently low inflation and
interest rates?
b) What challenges have low inflation and interest rates presented
for monetary policy?
If the primary goal is to reduce inflation, which of the
following fiscal policy actions would be appropriate during a
period of a rapidly increasing consumer price index? I. Reduce
government expenditures for defense and nuclear energy research.
II. Increase transfer payments to those most severely affected by
the rising price index. III. Increase personal income tax
rates.
Explain one of the reasons why policy makers usually focus on
demand-side policies to achieve their macroeconomics goals as
opposed to the supply-side ones.
8. Policy makers may become concerned if the unemployment rate
is too low because:
a.
output growth rate may decrease.
b.
stock prices may fall.
c.
an exchange rate crisis might occur
d.
inflation might increase.
3. Suppose a country's output is above the policy makers'
desired level of
output and is experiencing a trade deficit. Assume that the
policy makers'
goals are to achieve the desired level of output (i.e., natural
level of output)
and balanced trade. Suppose we do not consider the impact of
expectations,
answer the following questions. (Hint: using the ZZ and NX
curves)
.
a) Is it possible to use fiscal policy to achieve these two
goals
simultaneously? What kind of...