Questions from Macroeconomics


Q: Consider an economy where money is neutral. Specifically, assume that

Consider an economy where money is neutral. Specifically, assume that πt = mt and that r is constant at zero. Suppose that the money supply is given by mt =kmt−1 +εt, where ε is a white-noise disturba...

See Answer

Q: Summers (1988, p. 386) states, ‘‘In

Summers (1988, p. 386) states, ‘‘In an efficiency wage environment, firms that are forced to pay their workers premium wages suffer only second-order losses. In almost any plausible bargaining framewo...

See Answer

Q: Consider the model of Section 12.4. Suppose, however

Consider the model of Section 12.4. Suppose, however, the aggregate supply equation, (12.16), is πt = πt−1 +α(yt−1 − yn t−1 )+επ t , where επ is a white-noise shock that is independent of εIS and εY....

See Answer

Q: Consider the system given by (12.41). (

Consider the system given by (12.41). (a) What does the system simplify to when φπ = 1? What are the eigen values of the system in this case? Suppose we look for self-fulfilling movements in ~ y and π...

See Answer

Q: Suppose the economy is described by linear IS and money-market

Suppose the economy is described by linear IS and money-market equilibrium equations that are subject to disturbances: y=c−ai+ε1, m− p =hy−ki+ε2, where ε1 and ε2 are independent, mean-zero shocks with...

See Answer

Q: Suppose output is given by y = x +(k +εk

Suppose output is given by y = x +(k +εk)z +u, where z is some policy instrument controlled by the government and k is the expected value of the multiplier for that instrument. εk and u are independen...

See Answer

Q: Suppose inflation is described by the accelerationist Phillips curve, π(

Suppose inflation is described by the accelerationist Phillips curve, π(t)= λy(t),λ>0, and that output is determined by a simple IS curve, y(t) =− b[i(t)−π(t)], b > 0. Initially, the central bank is s...

See Answer

Q: Consider the Krugman model of Section12.7. Assume the economy

Consider the Krugman model of Section12.7. Assume the economy is in a steady state of the type described in that section starting in period 2. Suppose, however, that prices are completely sticky in pe...

See Answer

Q: Consider the Krugman model of Section 12.7. Assume that

Consider the Krugman model of Section 12.7. Assume that i1 = 0 and that the economy is in steady state starting in period 2. Suppose, however, that y1 (the value of y in period 1) need not equal y∗ (t...

See Answer

Q: ConsidertheKrugmanmodelofSection12.7.Assumetheeconomyisina steady state starting in period 3 and

ConsidertheKrugmanmodelofSection12.7.Assumetheeconomyisina steady state starting in period 3 and that i1 =0. (a) Suppose i2 =0. (i) How, if at all, does an increase in M2, holding M1 and M∗ fixed, aff...

See Answer