New Semester Started Get 50% OFF Study Help! --h --m --s Claim Now

Question Answers

Textbooks

Find textbooks, questions and answers

Oops, something went wrong!

Change your search query and then try again

Result Not Found

Books FREE
Study Help
Tutors
AI Study Planner NEW
Sell Books

Search
Sign In
Register

study help
business
foundations macroeconomics

Macroeconomics Policy And Practice 1st Edition Frederic S. Mishkin - Solutions

Suppose an econometric model based on past data predicts a small decrease in domestic investment when the Federal Reserve increases the federal funds rate. Assume that the Federal Reserve is considering an increase in the federal funds rate target to fight inflation and promote a low inflation
Consider two individuals forming expectations about mortgage rates. Mark forms adaptive expectations, and only looks at past mortgage rates to form expectations about future rates. Gloria forms rational expectations. Suppose an individual well-known for caring a lot more about unemployment than
Suppose that during the last ten years Nicole tried to forecast future inflation rates to negotiate her salary. Every year she used all available information and even incorporated news about the conduct of monetary policy.However, her forecasts were sometimes above and sometimes below the actual
What are the arguments for and against central bank independence?Rational Expectations and Policy Making
What has been the general experience of countries that have adopted inflation targeting?
What are the purposes of inflation targeting and how does this monetary policy strategy achieve them?
How does a credible nominal anchor help improve the economic outcomes that result from a positive aggregate demand shock?How does it help if a negative aggregate supply shock occurs?Approaches to Establishing Central Bank Credibility
What are the arguments for and against rules?The Role of Credibility and a Nominal Anchor
What is the time-inconsistency problem and what role does it play in the debate between advocates of discretion and rules in policy making?
What is the significance of the Lucas critique of econometric policy evaluation?REVIEW QUESTIONS All questions are available in at www.myeconlab.com.Lucas Critique of Policy Evaluation Policy Conduct: Rules or Discretion?
How does the theory of rational expectations differ from that of adaptive expectations?
Natural rates of unemployment are higher in France than in the United States. Suppose you are a recent college graduate and that you are eager to find a job. Which country’s labor market seems more promising to you? Can you identify the trade-off between a higher natural rate of unemployment and
The following graph represents the labor market of a given country. Assuming the prevailing real wage is w1,a) measure unemployment using the graph.b) list three reasons that might prevent this market from clearing.
Suppose that a country is rapidly making the transition from an agricultural based economy to an economy in which most of GDP comes from the production of manufactures.a) How do you think structural unemployment will be affected?b) Can you think of any measure the government might undertake to
Discuss the effects of the Internet on frictional unemployment. How do you think websites that allow employees to search for job opportunities more efficiently impact frictional unemployment?
During recessions it becomes increasingly difficult to find a job. How do you think the number of “discouraged workers” would be affected by a recession?Causes of Unemployment
For each of the following situations, explain how the labor force and the unemployment rate change.a) An individual quits his or her job and does not look for a job anymore.b) An individual that was not in the labor force now decides to look for a job.
Using a graph, analyze the effect of a recession and an increase in day care costs on the real wage and employment.Dynamics of Unemployment
Using the graphic representation of the labor market, analyze the effect of technological advances that have increased workers’ productivity in the last few decades (e.g., the Internet).What would be the effect on the real wage and employment if the supply curve does not shift?
Anthony currently earns $25 an hour and works forty hours a week. When his boss offers to pay him $28 per hour, Anthony decides to accept the offer, but decides to keep working forty hours. What is the effect of Anthony’s decision on the labor supply curve?
Assume the marginal product of labor is, where output is measured in trillions and L is the number of workers (in millions).a) Draw the MPL curve.b) Find the quantity of workers demanded if the real wage is $50,000 per worker.MPL = 0.65 * $13>L
What is cyclical unemployment?Supply and Demand in the Labor Market
What is the natural rate of unemployment?What has caused the natural rate to change over time?
Why does real wage rigidity contribute to unemployment? What are its causes?Natural Rate of Unemployment
What is frictional unemployment? Why can it be beneficial for workers, firms, and the economy?
What are the three categories of employment status? What movement between categories results from the existence of discouraged workers?Causes of Unemployment
Is the quantity of labor supplied inversely related to the real wage rate? Why?REVIEW QUESTIONS All questions are available in at www.myeconlab.com.Response of Employment and Wages to Changes in Labor Demand and Labor Supply Dynamics of Unemployment
Why is the quantity of labor demanded inversely related to the real wage rate?
What is the employment ratio? What notable trends in this ratio have occurred over the past fifty years?
In the aftermath of the subprime financial crisis of 2007–2009, an increase in real interest rates was expected in the United States (as a part of the Federal Reserve “exit strategy”). Using a graph, explain the effect on residential investment of an increase in real mortgage rates.
A relatively recent trend in most developed countries, including the United States, is the creation of single person households. Discuss the short- and long-run consequences of this trend in housing prices and residential investment.
During the second quarter of 2010 rumors about the health of the Greek economy created significant fluctuations in stock prices all over the world. Explain the effects of changes in stock prices on investment levels according to Tobin’s q theory.
The following graph shows the quarterly change in private inventories in the United States from 2007 to 2010. (Figures are billions of 2005 dollars.) Explain the changes in private inventories during this period.
In May 2010 an oil leak erupted from an offshore drilling platform in the Gulf of Mexico.The devastating effects of this leak prompted the Obama administration to encourage more strict regulations for this type of oil extraction.a) Discuss the effects of such regulations on the user cost of
One common feature of developing countries is their relatively less developed financial systems. What are the implications of a less efficient financial system for the level of investment in developing countries?
Discuss the effect of the investment tax credit made by the Obama administration on February 2009 on the level of investment in the United States. What does empirical evidence suggest about the link between taxes and investment?
Explain the consequences of the following events on the desired level of capital stock for the next period according to the neoclassical theory of investment:a) An autonomous easing of monetary policy.b) Increase in the depreciation rate of capital.c) An increase in productivity
Using the expression for the expected marginal product of capital, , plot the MPKe curve and determine the desired level of capital next period (measured in trillions) if the user cost equals 0.30 (assume the price of capital is normalized to 1.0).
Assume Luke is considering investing in new equipment and computers for his construction company. The real interest rate is 5%, construction equipment is valued at $600,000, and computers are valued at $20,000. Neither type of capital is expected to change its price during the next year.a)
What causes the demand for housing to increase and how do each of these determinants affect residential investment?The Neoclassical Theory of Investment
How is residential investment related to housing prices?
How are Tobin’s q theory and the neoclassical theory of investment related?Residential Investment
Why do firms hold inventories and why is their inventory investment a matter of interest to macroeconomists?
Explain how the desired levels of capital and investment are affected by changes in the expected marginal product of capital, the user cost of capital, and taxes.Inventory Investment Tobin’s q and Investment
According to the neoclassical theory of investment, how do firms determine their optimal amount of investment spending once they have identified their desired level of capital?
Explain how the user cost of capital and the expected marginal product of capital together determine the desired level of capital.
What is the user cost of capital? What variables determine this cost and how does a change in each variable affect it?
Identify and give examples of the three components of investment spending.REVIEW QUESTIONS All questions are available in at www.myeconlab.com.The Neoclassical Theory of Investment
Consider the accompanying graph to answer the following questions:a) If the intertemporal budget line changed from IBL1 to IBL2, was this the result of an increase or a decrease in the interest rate?b) Calculate the size of the income and substitution effects on present consumption, if this
Consider the following graph and assume that the interest rate decreases.a) Draw the new intertemporal budget line.b) Assuming that the income effect is smaller than the substitution effect, draw the new indifference curve where optimal consumption takes place and denote that as point “B.”
Draw a graph to illustrate the effects on present and future consumption of an interest rate increase when the income effect is larger than the substitution effect.
If instead of being a borrower in period 1, Carmencita is a lender, what will be the effect on consumption today if the real interest rate rises?
Why is the income effect characterized as a parallel shift of the intertemporal budget line?
Why is the substitution effect characterized as a pivoting of the intertemporal budget line?
Previous policies to increase savings in the United States include fiscal policy measures to exempt part of individuals’ savings from income taxes (e.g., the creation of IRAs).According to the precepts of behavioral economics, do you think these measures could have a significant impact on the
For each of the following situations, explain how current consumption will change according to the random walk hypothesis:a) The government increases taxes to close the budget deficit, but the size of the tax increase is smaller than expected.b) You receive your BS degree and find a job that
In May 2010 the size of Greece’s budget deficit increased its probability of default and triggered a crisis across the Euro zone. To decrease the budget deficit, the Greek government proposed many measures. A few of them involved decreasing pension and/or benefits payments to retirees. Evaluate
What does the Keynesian consumption function imply about the average propensity to consume of a rich and a poor country? Which country should have a higher average propensity to consume? How can you explain the relatively low levels of saving of rich countries?The Life-Cycle Hypothesis
Suppose Nicole’s yearly income is $5,000 when she is fifteen, $35,000 when she is twenty-five, and $70,000 when she is fifty(these are all present value measures of future income). Assuming Nicole’s autonomous consumption expenditure is $20,000 and her marginal propensity to consume is 0.75.a)
Describe the effects of a decrease in the interest rate on present and next period’s consumption if the individual is a net lender(i.e., has savings) after period 1 and the substitution effect is larger than the income effect.Show your answer graphically.The Keynesian Theory of Consumption
The following figure represents the optimization problem for a home owner whose home is currently valued at $250,000.a) Identify the optimum consumption point(i.e., what are the values of C1 and C2 at which this individual’s happiness is the highest possible)?b) If the value of the home decreases
Describe the effect of an increase in next period’s income on the intertemporal budget constraint. If next year’s income increases by$3,000 and the interest rate is 5%, by how much does the intertemporal budget line shift?
Assume that Maria does not have a preference for smooth consumption. In particular, the average of two consumption points on the same indifference curve yields the same utility to Maria (i.e., the average consumption point is on the same indifference curve as the other two points).a) Draw Maria’s
Suppose Prakash has an income today of$30,000, an expected income in period 2 of$35,000, and initial wealth of $5,000. Prakash faces an interest rate of 5%.a) Graph Prakash’s intertemporal budget line. Denote the values of C1 and C2 at the intersection points with the horizontal and vertical
What modifications to intertemporal choice theory have been made by the random walk hypothesis and behavioral economics?Intertemporal Choice and Consumption
Describe the life-cycle hypothesis and how it relates to intertemporal choice.
How do binding borrowing constraints affect the IBL and current and future consumption?The Keynesian Theory of Consumption The Permanent Income Hypothesis
How do changes in the real interest rate affect the IBL and current and future consumption?
What can shift the intertemporal budget line, IBL? What happens to current and future consumption when IBL shifts occur?
Explain how the intertemporal budget constraint and indifference curves are used to derive a consumer’s optimal choice of current and future consumption.The Intertemporal Choice Model in Practice: Income and Wealth The Intertemporal Choice Model in Practice: Interest Rates
What is the logic behind the intertemporal budget constraint? On what assumptions is it based, and how is its slope interpreted?
Why is a theory of consumption also a theory of saving?REVIEW QUESTIONS All questions are available in at www.myeconlab.com.Intertemporal Choice and Consumption
Assume a country has pegged the value of its currency to another country’s currency and that the anchor country increases its interest rate. Describe the effects on the following:a) The export sector of the pegging countryb) Households’ net worth if the pegging country is forced to devalue its
Explain why a central bank might want to intervene in the foreign exchange market to prevent an excessive appreciation of its currency, even if it previously stated that it will allow its currency to respond to supply and demand conditions in the foreign exchange market.
The following T-account (in billions of dollars)depicts an intervention in the foreign exchange market conducted by Federal Reserve:a) Did the Federal Reserve buy or sell U.S.dollars?b) What is the effect on the exchange rate from this intervention?Fixed Exchange Rate Regimes To Peg or Not to Peg
On November 2007 Brazil announced the discovery of huge oil reserves that could potentially transform the country into a big exporter of oil.a) What would be the effect of the increase in revenues from oil exports on Brazil’s exchange rate?b) How would this affect other Brazilian exports? Is this
Suppose that the Federal Reserve cannot convince the public of its commitment to fight inflation in the United States in the near future.a) What would be the effect on the expected appreciation of the U.S. dollar?b) What would be the effect on the spot exchange rate for the U.S. dollar? Explain
The following table shows the nominal exchange between the U.S. dollar and the euro (U.S. dollars per euro) at different points in time.Source: Fed Data.a) Plot the nominal exchange rate and determine if the U.S. dollar has been appreciating or depreciating with respect to the euro during this
In March 2009 the nominal exchange rate between the U.S. dollar and the Brazilian real was around 2.3 real per dollar. By March 2009 it was quite clear that the Brazilian economy was not as affected by the world financial crisis as the U.S. economy. In March 2010, the exchange rate was 1.8 real per
For all the following examples the law of one price does not hold (i.e., at current nominal exchange rates, the price of these goods or services are not the same). For each case explain what prevents the law of one price from holdinga) a ton of sugar in the United States and a ton of sugar in
A Starbucks coffee sells for 10 yuan in Beijing, China, and for $2 in Chicago.a) Calculate the nominal exchange rate if the law of one price holds.b) Assume that currently the nominal exchange rate is 7 yuan per dollar. What would be the purchasing power parity theory prediction about the future
Suppose a bottle of wine sells for $16 in California and for E10 in France. Assuming a nominal exchange rate of 0.75 euro per dollar,a) calculate the real exchange rate between U.S. wine and French wine.b) calculate the real exchange rate between U.S. wine and French wine if the domestic price of
What are the advantages and disadvantages of exchange-rate pegging?
What is the policy trilemma?To Peg or Not to Peg
How do fixed, floating, and managed or dirty float exchange rate regimes differ?
What are the short-run effects on aggregate output and the inflation rate when the domestic currency appreciates or depreciates?Intervention in the Foreign Exchange Market Fixed Exchange Rate Regimes
Identify three factors that could cause the exchange rate for a currency to rise.
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?Analysis of Changes in Exchange Rates Aggregate Demand and Supply Analysis of Exchange Rate Effects
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?
What is the foreign exchange market?Describe the two types of transactions that take place in this market.
Consider the effect of a tax cut (if government spending remains the same) in a country with an underdeveloped financial system.a) Assuming individuals are forward looking (i.e., the Ricardian equivalence argument holds), what do you think might happen to national saving in this case?b) How do you
What would happen to revenue from seignorage if the inflation rate is very high? Hint:check Equation 6 and assume a quickly rising price level.Budget Deficits and Ricardian Equivalence
A government committed to long-run fiscal discipline (i.e., low or zero budget deficits)usually conducts contractionary fiscal policy at some point to reduce the government deficit. If that action is interpreted as a commitment to long run fiscal disciplinea) Describe the effects on autonomous
Assume that the expenditure and tax multipliers can be estimated to be 0.75 and 0.5 respectively.a) Would you recommend expansionary fiscal policy based on tax cuts or increased government expenditures?b) Suppose now that there is substantial evidence that supports the hypothesis of a crowding out
On March 26, 2010, the Wall Street Journal reported the following: “A sudden drop-off in investor demand for U.S. Treasury notes is raising questions about whether interest rates will finally begin a march higher [...]. [...] there are signs the spotlight is turning to the ability of the U.S. to
As announced by the Obama administration, part of the 2009 fiscal stimulus package is directed to make broadband internet access available to most Americans.a) Should this be considered government consumption or government investment?b) Describe the effect of such expenditures on the government
In recent years, the United States has experienced a sharp increase in obesity rates (in particular amongst teenagers), which is considered to increase the probability of chronic diseases like diabetes. Even if the dependency ratio is constant, what would be the effect of such a trend on the size
The definition of the government deficit is a matter of debate. What would be the effect on the measurement of the government deficit of considering Social Security taxes a “forced loan to the government” and benefit payments(e.g., Medicare, Social Security benefits, etc.) a“repayment of
Assume that Social Security taxes remain constant, but that the number of employed people in the United States declines over time.a) Explain the effect of such a scenario on the size of contributions for social insurance and the government deficit in the United States.b) Assume now that employment

Showing 3500 - 3600 of 5010

First
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
Last

Step by Step Answers

Services

Sitemap
Fun
Definitions
Become Tutor
Used Textbooks
Study Help Categories
Recent Questions
Expert Questions
Campus Wear
Sell Your Books

Company Info

Security
Copyrights
Privacy Policy
Terms & Conditions
SolutionInn Fee
Scholarship
Online Quiz
Give Feedback, Get Rewards

Get In Touch

About Us
Contact Us
Career
Jobs
FAQ
Student Discount
Campus Ambassador

Secure Payment

Download Our App

© 2026 SolutionInn. All Rights Reserved