1/ Trace out, step by step, the impact on the economy of an increase in the money supply in the context of a flexible exchange rate, and explain whether monetary policy is stronger or weaker in an open economy than in a closed economy.

2/ Explain:

a. What are discouraged workers, and how can they cause paradoxical movements in measured unemployment?

b. What is the monetarist rule, the main argument in favor of adopting it, and the main argument against?

c. What is the multiplier, and how it is useful?

d. What are the two main circumstances in which a budget deficit could be viewed as placing a burden on future generations, and why?