Monetary Policy

1. If the economy is operating below full employment, should the Federal Reserve engage in expansionary or contractionary monetary policy to bring the economy back to full employment?

2. When the economy has a positive GDP gap, then

3. If the economy has a positive GDP gap, should the Federal Reserve engage in expansionary or contractionary monetary policy?

4. Monetary policy falls under the watchful eye of the _______________.

5. There are ____ district Federal Reserve Banks.

6. _________ is the chairperson of the Federal Reserve Board of Governors. (You need to know his full name. You need to be able to spell it correctly.)

7. True or False . An increase in the reserve requirement ratio causes the money multiplier to increase.  

8. Think about the loanable funds market. If the Federal Reserve engages in an open market purchase of government, the supply curve  and the real interest rate .

9. Think about the loanable funds market. If the Federal Reserve engages in an open market sale of government, the supply curve  and the real interest rate .

10. When the Federal Reserve engages in an open market sale, this pushes the interest rate  and the aggregate demand curve shifts to the .

11. The Federal Reserve is attempting to increase the aggregate demand curve to fight a recession. Which of the following would accomplish their goal? Check all that apply.

12. The Federal Reserve is attempting to decrease the aggregate demand curve to fight inflation. Which of the following would accomplish their goal? Check all that apply.

13. Assume that the bank currently has excess reserves of zero, and the required reserve ratio is 10%.  If the Fed buys $150 million, the amount of new loans that the bank can make initially increases by _______ million. Be exact.

14. True or False. If the economy is currently operating at potential GDP, an open market purchase of government securities by the Federal Reserve Board will put upward pressure on prices.

15. Assume that the bank currently has excess reserves of zero, and the required reserve ratio is 20%.  If the Fed sells $120 million of government securities to JeffCo Bank, the amount of loans that the bank can make decreases initially  by _______ million. Be exact.  

16. Use the Taylor Rule to find the federal funds rate (FFR).

Assume that the Fed has a target inflation rate of 2% and a target GDP growth rate of 3%. What FFR should they set if the current inflation rate is 2% and GDP is currently growing at 3%?  

Answer: _____%

17. Use the Taylor Rule to find the federal funds rate (FFR).

Assume that the Fed has a target inflation rate of 2% and a target GDP growth rate of 3%. What FFR should they set if the current inflation rate is 2% and GDP is currently growing at 1%?  

Answer: _____%

18. Use the Taylor Rule to find the federal funds rate (FFR).

Assume that the Fed has a target inflation rate of 2% and a target GDP growth rate of 3%. What FFR should they set if the current inflation rate is 5% and GDP is currently growing at 1%?   This is an example of stagflation where the economy experiences inflation with slow growth.

Answer: _____%

19. When the Fed used quantitative easing to combat the Great Recession, they purchased assets from bank balance sheets. What did the Fed think that banks would do in response? Explain why you believe this outcome would occur.

1)Throughout much of the Twentieth Century and especially during the Cold War, Americans developed a deep fear of communism. But why communism? What is it? Was America's fear of communism the result of an accurate understanding of Soviet communism?

Review prisoners dilemma and comment on lessons learned.

Many global companies have evolved to or are evolving to, a ‘stateless corporation’.  The US and most OECD countries have legal authority to tax a domiciled corporation on its worldwide revenue.  However, as of 2019, most countries tax these corporations based on territorial tax (revenue within that country's borders).  However, the US continues to tax these corporations based on global revenues.  Is this a good choice for the US?  Why or why not?.

1. What is the opportunity cost of holding cash? To answer the question, you should think of others ways to hold your money other than cash.

2.Most of us occasionally engage in barter. For example, I agree to bake a cake for a neighbor who gives me fresh tomatoes from her garden. If it is common, why isn't it the primary means of exchange?

3. Thinking about the examples of commodity monies , which do you think was the most practical? Why?

Create loanable funds market graphs for each the following (be sure to note what is happening on the x and y axis). You need to create a separate graphical answer,

1. If households start to fear that banks are unsafe.
2. If the government spends more and runs greater deficits.
3. Television newscasters convince most people that the end of the world will occur in 2018.
4. Breakthrough advances in pharmaceuticals increase life expectancy to 100 years.

a. Derive the aggregate supply equation from the sticky price model.

b. Derive the Phillips curve from the aggregate supply equation.

James owns both ski lodges, and therefore all of the skiing, in town. There are no other ways

to ski or ski lodges within 100 miles. Devise a way to segment the skiers in the town

into two markets, high willingness to pay and low willingness to pay, and find a way to

successfully charge them different prices. You need to describe how you will get the high

willingness to pay consumers to reveal their increased willingness to pay. You will also need to

describe how you will prevent consumer arbitrage between the high and low willingness to pay

consumers.

Discuss four protectionist measures. In general, what are the advantages and disadvantages of each measure.

Discuss at least 5 Federal Reserve policy actions. Indicate which direction would be expansionary and which contractionary. Make sure you include open market operations, their most useful tool.

What are the relative advantages and disadvantages of the basic entry strategies that firms have available to them when they enter international markets.

Discuss the state of US shipbuilding.   Where are we compared to other countries?

If society did not want to leave things to the market, how might it decide who got how many masks?

Ed has an idea for making money. He will get broken things on Craigslist that people are giving away for free, and he will fix these things up and then sell them. It does not cost any money for Ed to fix these things. Ed says "this is a way for me to make free money, with no opportunity costs." Is Ed right? Or are there opportunity costs to doing what Ed is planning?

Why might a country want to produce a good itself, even if it does NOT have a comparative advantage in that good?

Draw an Edgeworth Box diagram with an initial endowment. Show the gains from trade relative to this endowment point assuming that each person has normal shaped indifference curves. Show the Pareto Efficient points that are within the region of gains from trade relative to the initial endowment. Make sure that your initial endowment point is not Pareto Efficient.