Questions from Macroeconomics

Q: Suppose an economy described by the Solow model has the following production

Suppose an economy described by the Solow model has the following production function: Y= K1/2(LE)1/2. a. For this economy, what is f(k)? b. Use your answer to part (a) to solve for the steady-state v...

Q: Describe the impossible trinity.

Describe the impossible trinity.

Q: Suppose that the economy is initially at a longrun equilibrium. Then

Suppose that the economy is initially at a longrun equilibrium. Then the Fed increases the money supply. a. Assuming any resulting inflation to be unexpected, describe any changes in GDP, unemployment...

Q: Under what circumstances might it be possible to reduce inflation without causing

Under what circumstances might it be possible to reduce inflation without causing a recession?

Q: The text analyzes the case of a temporary shock to the demand

The text analyzes the case of a temporary shock to the demand for goods and services. Suppose, however, that et were to increase permanently. What would happen to the economy over time? In particular,...

Q: Albert and Franco both follow the life-cycle hypothesis: they

Albert and Franco both follow the life-cycle hypothesis: they smooth consumption as much as possible. They each live for five periods, the last two of which are retirement. Here are their incomes earn...

Q: Explain why changes in consumption are unpredictable if consumers obey the permanent

Explain why changes in consumption are unpredictable if consumers obey the permanent-income hypothesis and have rational expectations.

Q: It is an election year, and the economy is in a

It is an election year, and the economy is in a recession. The opposition candidate campaigns on a platform of passing an investment tax credit, which would be effective next year after she takes offi...

Q: What is meant by the “time inconsistency” of economic policy

What is meant by the “time inconsistency” of economic policy? Why might policymakers be tempted to renege on an announcement they made earlier? In this situation, what is the advantage of a policy rul...

Q: Find some recent projections for the future path of the U.

Find some recent projections for the future path of the U.S. government debt as a percentage of GDP. What assumptions are made about government spending, taxes, and economic growth? Do you think these...