What happened in terms of the AS/AS model during the Great Recession?
> If the quantity of money supplied exceeds the quantity of money demanded then what can you say about the current rate of interest and what bankers will likely do with the interest rates they charge? Why?
> When the Fed buys government bonds what happens to the price of these bonds and the interest rate?
> If the GDP increases what is expected to happen to the interest rate?
> Why is mutual interdependence important under oligopoly, but not so important under perfect competition, monopoly, or monopolistic competition?
> Assume velocity is constant and we are at full employment. In order to increase the real GDP level 3%, then how much would we have to change the money supply?
> What should the Fed do with the money supply today? Why?
> When would it be most appropriate for the Fed to increase the money supply: during a recession or when the economy is expanding? Why?
> Briefly summarize what the Fed could do with its policy tools if it wished to increase the money supply?
> Which of the three monetary policy tools is the one which is most used? Why?
> Which of the three monetary policy tools mainly has is impact felt primarily on altering expectations? Why?
> Which of the three monetary policy tools is the least powerful? Why?
> Which of the three monetary policy tools is the most powerful? Why?
> How can the loan decisions of individuals and private bankers contribute to the instability in the macroeconomy (the business cycle)? Otherwise stated, how can an uncontrolled banking system destabilize the economy?
> What are the arguments for and against deposit insurance such as that provided by the FDIC?
> Draw a graph that shows a monopolistically competitive firm with a short-run profit. Explain what will happen to its demand curve as additional firms enter the industry.
> What are the advantages of an economy using money as opposed to a barter system of exchange?
> Why do Americans (and people around the world) continue to use the dollar as money considering that it is not backed by gold or anything else tangible?
> What is the major argument in favor of an independent Fed?
> Why isn’t credit cards money?
> What would you do to reduce the deficit?
> How does government debt create a socially more inequitable distribution of income---redistribute income away from those with relatively lower incomes to those with relatively high income?
> How could a greater fiscal deficit create a greater trade deficit?
> How could deficit spending help offset the otherwise lower rates of economic growth associated with a crowding-out effect?
> How could time lags associated with the implementation of fiscal policy destabilize the business cycle?
> In practice do we have progressive, proportional, or regressive personal income tax rate system?
> Consider this statement: “Because price equals longrun average cost and profits are zero, a monopolistically competitive firm is efficient.” Do you agree or disagree? Explain.
> How politically popular is it for government to reduce spending and/or to raise taxes?
> If federal government wished to reduce the deficit to any significant degree without raising taxes, where would the reduced spending likely to have to come from?
> What are the general purposes of taxes?
> What are some examples of payments people must make for government goods or services based on the ability-to-pay principle?
> According to Public Choice Theory, how could government regulation be doomed to failure?
> What is the opportunity cost of government spending on servicing the interest on the debt?
> Is the tax imposed on cigarettes progressive, proportional or regressive?
> When is the most appropriate time to reduce the deficit?
> What would likely happen to the level of economic activity if the government took the necessary steps to reduce the deficit significantly in a relatively short period of time?
> What happens to the multiplier if there is an increase in the marginal propensity to consume?
> Suppose the minimum point on the LRAC curve of a soft-drink firm’s cola is $1 per liter. Under conditions of monopolistic competition, will the price of a liter bottle of cola in the long run be above $1, equal to $1, less than $1, or impossible to deter
> How could a greater budget deficit increase the trade deficit?
> According to Keynesians, when should the federal government run a deficit and when should it run a surplus?
> Which portion of the Laffer curve did the supply-siders argue we were located when they recommended tax cuts and predicted a rise in tax revenues? Where on the Laffer curve were we in fact located?
> According to Keynesian economics, what impact would a balanced budget amendment to the constitution requiring the federal government to balance its budget annually have on the economy?
> If your answer to #1 above was yes, what do you think would happen to your taxes? What would happen to your private health insurance premiums? Would you come out ahead or not?
> Should government ensure basic comprehensive medical care for all citizens as a basic human right and pay for this through general tax revenues? Why or why not?
> What is the long-run impact of a decrease in aggregate demand on the price level and real GDP?
> What is the long-run impact of an increase in aggregate demand on the price level and real GDP?
> Why is the long-run aggregate supply curve vertical?
> Why is the short-run aggregate supply curve upward sloping?
> Evaluate the following statement: “A cartel will put an end to price war, which is a barbaric form of competition that benefits no one.”
> Assume a research firm collects survey sales data that reveal the relationship between the possible selling prices of hamburgers and the quantity of hamburgers consumers would purchase per year at alternative prices. The report states that if the price o
> a. If total spending increases, or decreases, does this create a tradeoff between unemployment and inflation? b. What could cause a simultaneous decrease in unemployment and inflation? What could combat stagflation?
> If AD was increasing quite a bit pushing the economy toward full employment, but was creating politically unacceptable high rates of inflation, what might the government want to do with its spending and/or taxes to reduce the inflationary pressures? What
> What impact would a dramatic increase in the world price of oil have on the national economy?
> What impact would an increase in the nation's money supply or the federal government's budget deficit have on the real GDP and price level in the macroeconomy? What phase of the business cycle might this create?
> Can equilibrium occur below full employment? Why, or why not?
> What can cause an increase in AD and therefore the real GDP and price levels?
> If workers push for higher wages and receive them, could this create inflation? If so, what kind of inflation would this create?
> Which type of inflation is usually most pronounced during the expansionary phase of the business cycle?
> If you got a 7% pay raise did your real income necessarily rise by 7%?
> What might be a general distinction between oligopolists that advertise and those that do not?
> What should happen to the money supply to combat demand-pull inflation?
> Why do most homebuyers hope for inflation?
> Why did the high rates of inflation during the 1970s hurt Savings and Loans so much?
> Why do most banks and credit card companies offer interest rates on their cards which vary with the current yield on newly issued U.S. Treasury bills?
> What are some examples of inferior products?
> What should government do with the money supply to combat a recession? Inflation?
> What should government do with its spending and taxes during an upturn in the business cycle? Why?
> What should government do with its spending and taxes during a recession? Why?
> What is the major economic problem during the expansionary phase of the business cycle?
> Why is a slow growing economy a problem during a recession?
> Ace Manufacturing produces 1,000 hammers per day. The total fixed cost for the plant is $5,000 per day, and the total variable cost is $15,000 per day. Calculate the average fixed cost, average variable cost, average total cost, and total cost at the cur
> What are the two major problems associated with a recession?
> What are some barriers to entry that may prevent potential competitors from entering a market?
> If a competitive industry expands and higher wages must be paid to attract more workers then what will the long-run supply curve for this industry look like?
> If a competitive industry is currently losing money, what can be expected to happen to the number of sellers, the price of the product, the volume of output and losses in this industry over time?
> What is the general cause of all recessions? All expansionary phases of the business cycle?
> If a firm is producing where MR =MC, and at that output level TR = $4,500, TC = $5,000, and TVC = $4,000 per week, is the firm making or losing money? How much? Should the firm shut down?
> If a firm has TFC = $2,000 per day, and is currently losing $1,500 per day, should the firm shut down?
> If a profit-maximizing firm is producing an output level in which marginal revenue equals marginal cost, then is this firm earning a profit?
> If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost, should it produce more, less or the same?
> Assume the supply and demand curves for a good are given by the following equations: Qd = 1000 - 20P ; Qs = 5P. What is the equilibrium price and quantity?
> a. Construct the cost schedule using the data below for a firm operating in the short run. b. Graph the average variable cost, average total cost, and marginal cost curves.
> Why do you think "rock" stars charge concert ticket prices below what they could charge and still sell out their performances?
> What can we say about the demand and supply curves for products which are "free", like matches, toothpicks, and kittens?
> Is the price system a "just" or "fair" way to allocate products? What about medical services?
> Who does the demanding and the supplying in the labor market? The loanable funds market?
> What can you say about the price of campus parking permits if there never seems to be enough places to park even when you have a permit?
> What causes the business cycle?
> Determine the effect on GDP for the following. a. Consumption increases. b. Government spending falls.
> Is it possible for real GDP to increase and there to be no increase in employment?
> Which is a better indicator of growth in job opportunities: an increase in nominal GDP or real GDP?
> How could nominal GDP increase but real GDP remain the same?
> Consider this statement: “Total output starts falling when diminishing returns occur.” Do you agree or disagree? Explain.
> What would happen to GDP if a significant number of house-spouses who were previously staying home to care for their children began taking jobs and placing their children in day-care? Would the nation's well-being necessarily be better off?
> If the illegal drug trade was legalized what would happen to GDP?
> Which of the components of GDP must increase if we are to experience greater rates of economic growth?
> How are price controls related to anti-poverty programs?
> Some people have argued that the American workers' movement would have been more successful in achieving its goals if it would have been more organized across labor markets; if it would have adopted a more European style of creating a "Labor" political p
> Some people have argued: "Any gains made by unions in the form of higher wages will create lower wages for non-unionized workers." Leaving side whether this is actually the case or not, what is the economic logic behind such an argument?
> For each of the following determine the impact on the demand or the supply of labor and the effect on the equilibrium wage and quantity of labor employed. a. An increase in the price of capital. b. A union is formed which uses collective bargaining to ob
> What is the principle strategy of an inclusive (industrial) union in order to increase wages of its members?
