Questions from Macroeconomics

Q: Suppose the rural part of a country is hit by a major

Suppose the rural part of a country is hit by a major earthquake that destroys 10 percent of the country’s housing stock. The government and private sector respond with a major construction effort to...

Q: The end of Section 12.4 contains a summary of the

The end of Section 12.4 contains a summary of the short- run model. Explain the economic reasoning that underlies each step in this summary.

Q: Suppose the economy is hit by an unexpected oil price shock that

Suppose the economy is hit by an unexpected oil price shock that permanently raises oil prices by $50 per barrel. This is a temporary increase in

Q: Suppose a large number of new immigrants enter the labor market.

Suppose a large number of new immigrants enter the labor market. Assume this increase in the supply of labor provides a drag on wage increases: wages rise by less than the prevailing rate of inflation...

Q: Consider the policy rule used in the chapter: Rt −

Consider the policy rule used in the chapter: Rt −

Q: Our monetary policy rule responds only to shocks to the inflation rate

Our monetary policy rule responds only to shocks to the inflation rate. We saw in Section 13.5 that this means that aggregate demand shocks can cause the economy to undergo a “ boom- recession” cycle....

Q: Consider a simplified version of the Taylor rule, where monetary policy

Consider a simplified version of the Taylor rule, where monetary policy depends only on short- run output: Rt −

Q: Consider the policy rule for the nominal interest rate in equation (

Consider the policy rule for the nominal interest rate in equation (13.5). Draw a graph with the inflation rate on the horizontal axis and the nominal interest rate on the vertical. (a) What is the sl...

Q: The Federal Reserve is obsessed with inflation, so much so that

The Federal Reserve is obsessed with inflation, so much so that it ignores the fact that millions of American workers are unemployed. We need a Fed that fights for American jobs. We need a Fed that vi...

Q: Reread the inflation shock example (event #1) in Section 

Reread the inflation shock example (event #1) in Section 13.5. Suppose the size of the shock is