Question: What relationship does the aggregate supply curve

> What modifications to the intertemporal choice theory have been suggested by the random walk hypothesis and behavioral economics?

> Describe the life-cycle hypothesis and how it relates to intertemporal choice.

> Why is a theory of consumption also a theory of saving?

> What happens in a fixed exchange rate regime if a currency is overvalued? What problem can this create?

> How do fixed, floating, and managed (dirty) float exchange rate regimes differ?

> Why do central banks intervene in foreign exchange markets? How do these interventions affect their international reserves and exchange rates?

> What are the short-run effects on aggregate output and the inflation rate when the domestic currency appreciates or depreciates?

> Why does the foreign exchange market move toward equilibrium when the foreign exchange rate for the dollar is either above or below its equilibrium value?

> How is the theory of purchasing power parity related to the law of one price? Why doesn’t PPP hold in the short run?

> Differentiate the nominal and real exchange rates between dollars and euros. Do the two exchange rates move together? Why is appreciation or depreciation of real exchange rates important?

> Go to the St. Louis Federal Reserve FRED database, and find data on the total public debt by the federal government (GFDEBTN) and the amount of debt held by foreign and international investors (FDHBFIN). Download the data into a spreadsheet, and make sur

> What are the advantages and disadvantages of exchange-rate pegging?

> What is the foreign exchange market? Describe the two types of transactions that take place in this market.

> What determines whether budget deficits will result in inflation in the long run?

> Why are fiscal multipliers higher when the policy rate has hit the floor of the zero lower bound?

> Is balancing the budget a contractionary macroeconomic policy?

> How does a supply-side analysis of the effects of a tax cut differ from one that focuses solely on aggregate demand?

> How can government increase the quantity of aggregate output demanded by changing government spending and taxes? Why does the multiplier for spending changes differ from that for tax changes?

> What arguments should be considered in assessing the burden that government debt imposes on future generations?

> What factors have influenced the debt-to GDP ratio in the United States since 1940?

> What is a budget deficit, and what are the two main ways in which the government can finance deficit spending? Which of these methods of financing deficits does the U.S. government most commonly use?

> Go to the St. Louis Federal Reserve FRED database, and find data on the total government debt as a percentage of GDP (GFDEGDQ188S) and gross domestic product (GDP). a) Report the most current available debt to-GDP ratio, and the ratio one year prior and

> How does the Ricardian equivalence view of the effects of tax cuts (and budget deficits) differ from the traditional view? What objections to the Ricardian equivalence view have been raised?

> Identify the four main categories of government spending and give an example of each. What are the government’s four main revenue sources?

> What prevented the financial crisis of 2007– 2009 from becoming a depression?

> What principal-agent problems resulted from the originate-to-distribute mortgage lending model?

> How did financial innovations in mortgage markets contribute to the 2007–2009 financial crisis?

> Why does debt deflation make financial crises worse?

> What causes bank panics and why do they worsen financial crises?

> Describe the three factors that commonly initiate financial crises, and explain how each one contributes to a crisis.

> Why is a financial crisis likely to lead to a contraction in economic activity?

> How should central banks respond to asset-price bubbles?

> Go to the St. Louis Federal Reserve FRED database, and find data on the three month U.S. Treasury note (TB3MS), the three-month AA nonfinancial commercial paper rate (CPN3M), the federal funds rate (FEDFUNDS), and the total volume of assets on the Federa

> What are the two types of asset-price bubbles? Which type poses a bigger threat to the financial system? Why?

> How does asymmetric information help us define a financial crisis?

> Starting from a situation of long-run equilibrium, what are the short- and long-run effects of a temporary negative supply shock?

> What are supply shocks? Distinguish between positive and negative supply shocks and between temporary and permanent ones.

> Starting from a situation of long-run equilibrium, what are the short- and long-run effects of a positive demand shock?

> What are demand shocks? Distinguish between positive and negative demand shocks.

> Describe the adjustment to long-run equilibrium if an economy’s short-run equilibrium output is above potential output.

> How does the condition for short-run equilibrium differ from that for long-run equilibrium?

> What factors shift the short-run aggregate supply curve? Do any of these factors shift the long-run aggregate supply curve? Why?

> Identify changes in three factors that will shift the aggregate demand curve to the right and changes in three different factors that will shift the aggregate demand curve to the left.

> Go to the St. Louis Federal Reserve FRED database, and find data on corporate net worth of nonfinancial businesses (TNWMVBSNNCB), private domestic investment (GPDIC1), and a measure of financial frictions, the St. Louis Fed financial stress index (STLFSI

> Starting from a situation of long-run equilibrium, what are the short- and long-run effects of a permanent negative supply shock?

> Explain why the aggregate demand curve slopes downward and the short-run aggregate supply curve slopes upward.

> What causes the long-run aggregate supply curve to shift?

> Why does the short-run aggregate supply curve slope upward?

> What is Okun’s law? How do we combine it with Phillips curve analysis to derive the short-run aggregate supply curve?

> According to modern Phillips curve analysis, what factors determine the rate of inflation? How do changes in each factor affect the short-run Phillips curve?

> What are adaptive expectations? What justifies the assumption of adaptive expectations in Phillips curve analysis?

> According to the expectations-augmented Phillips curve, what factors determine the rate of inflation? How do changes in each factor affect the short-run Phillips curve?

> What basic relationship does the long-run Phillips curve describe? How does this relationship differ from that described by the short-run Phillips curve?

> Go to the St. Louis Federal Reserve FRED database, and find data on house prices (SPCS20RSA), stock prices (SP500), a measure of the net wealth of households (TNWBSHNO), and personal consumption expenditures (PCEC). For all four measures, be sure to con

> Go to the St. Louis Federal Reserve FRED database and find data on the net saving rate as a percentage of national income (W207RC1A156NBEA). a) Calculate the average net saving rate over the period from 1960 to 1980, and again for the period from 1980 to

> What condition is required for equilibrium in the money market? Why does the money market move toward equilibrium?

> What are open market operations? How does the Fed use these operations to increase or decrease the money supply?

> In Keynes’s liquidity preference theory, what variables determine the demand for real money balances? How does the demand for real money balances respond to changes in each of these variables?

> How does an autonomous tightening or easing of monetary policy by the Fed affect the aggregate demand curve?

> How do changes in planned expenditures affect the aggregate demand curve?

> What is the aggregate demand curve? Why does it slope downward?

> How does an autonomous tightening or easing of monetary policy by the Fed affect the MP curve?

> What is the monetary policy curve? Why does it slope upward?

> What can increase the equilibrium interest rate in the liquidity preference framework?

> What is the real interest rate? Why can the Fed control the real interest rate in the short run but not in the long run?

> Go to the St. Louis Federal Reserve FRED database, and find data on the personal consumption expenditure price index (PCECTPI), real GDP (GDPC1), an estimate of potential GDP (GDPPOT), and the federal funds rate (DFF). For the price index, adjust the un

> What does the IS curve show? Why does it slope downward?

> What happens to aggregate output if unplanned inventory investment is either positive or negative?

> What condition is required for equilibrium in the goods market?

> How and why do changes in the real interest rate affect net exports?

> How and why do changes in the real interest rate affect planned investment spending?

> What are the two types of planned investment spending?

> According to the consumption function, what variables determine aggregate spending on consumer goods and services? How is consumption related to each of these variables?

> What causes the IS curve to shift?

> What are the four components of planned expenditure, and why did Keynesian analysis emphasize this concept?

> How do conflicting views of market structure influence the ideas of classical and Keynesian macroeconomists regarding price and wage flexibility and how quickly the economy adjusts to long-run equilibrium?

> Go to the St. Louis Federal Reserve FRED database, and find data on the personal consumption expenditure price index (PCECTPI), the unemployment rate (UNRATE), and an estimate of the natural rate of unemployment (NROU). For the price index, adjust the un

> How do Keynesian views on macroeconomic fluctuations differ from those of classical macroeconomists?

> What is the difference between the short run and the long run in macroeconomic analysis? Why do macroeconomists differentiate between the two time horizons?

> What were the “Great Inflation” and the “Great Moderation”?

> Distinguish among leading, lagging, and coincident economic variables.

> Distinguish between pro cyclical and countercyclical economic variables.

> How do menu costs contribute to sticky prices?

> What are business cycles?

> Why is sustained per-capita growth possible in the Romer model but not in the Solow model?

> What role does the legal system play in promoting property rights?

> What is a patent? Why do governments grant them?

> On January 29, 2013, the Federal Reserve released a special statement that clarified its goals of “price stability” and “maximum employment.” Specifically, it stated that “the Committee judges that inflation at the rate of 2 percent, as measured by the a

> Why may private R&D expenditures be too low?

> In the Romer model, how does an increase in the fraction of the population engaged in R&D affect the growth rate of per-capita output over time?

> As an input to production, how does technology differ from labor and capital inputs?

> What is the impact of an increase in saving in the Romer model?

> In the Romer model, how does an increase in total population affect the growth rate of per capita output over time?

> According to the growth accounting equation, what are the three sources that contribute to economic growth?

> What are the four basic results of the Solow growth model? What is the model’s chief weakness?

> How does an increase in total factor productivity affect output per worker?

> What shortcoming of the Solow growth model does the Romer model attempt to remedy?

> How does population growth affect the steady-state levels of capital and output per worker?

> Go to the St. Louis Federal Reserve FRED database, and find data on real GDP (GDPC1) and a measure of the price level, the personal consumption expenditure price index (PCECTPI). Convert the price index to inflation rate by setting the units to “Percent

> Beginning from a steady state in the Solow growth model, explain how an increase in the saving rate will affect the levels and growth rates of capital and output per worker.