Study Questions for the Take Home Final in Econ 12 Spring 2020
1. If you were an advisor to a poor country that wanted to increase the growth rate of real GDP per worker what policies would you recommend and why? Be sure to refer to the growth models that inform your recommendations. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
2. Suppose you are an advisor to the US government. Your job is to evaluate the benefits of increased immigration on the US economy. Would you advise the US government to increase immigration or decrease immigration? Use the models of both the long run and the very long (that is, growth models) to justify your answer. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
3. You are interviewing for a job as macroeconomic policy advisor to a US Senator. The Senator asks you a series of questions: “1. Why is inflation costly?” “2. If inflation is so costly, why is it so common in modern economies? “3. Why can’t we just print money to pay the government’s bills?” “4. The chair of the US Federal Reserve Bank told me the other day that in the short run expansionary monetary policy reduces interest rates but in the long run faster growth of the money supply raises interest rates. Can you explain this to me?” Use any and all appropriate models to answer the senator’s four questions. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
4. Discuss the circumstances under which expansionary monetary policy has no effect on output in the short run. Discuss the circumstances under which expansionary fiscal policy has no effect on output in the short run. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
5. After the terrorist attacks on the US on September 11, 2001 there was a dramatic increase in demand for M1 as households desired to hold safe, liquid assets. Use graphs and words to analyze the effects of this shock on the economy in the short run if, i) the Fed does nothing, ii) if the Fed uses an interest rate targeting policy, iii) the Fed uses an output targeting policy. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
6. Savings (or the savings rate) is a part of every model of the macroeconomy we have studied this term. If savings (or the savings rate) increases, describe the effects in very long run growth models, the long run loanable funds model, and our short run model. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
1. If you were an advisor to a poor country that wanted to increase the growth rate of real GDP per worker what policies would you recommend and why? Be sure to refer to the growth models that inform your recommendations. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
2. Suppose you are an advisor to the US government. Your job is to evaluate the benefits of increased immigration on the US economy. Would you advise the US government to increase immigration or decrease immigration? Use the models of both the long run and the very long (that is, growth models) to justify your answer. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
3. You are interviewing for a job as macroeconomic policy advisor to a US Senator. The Senator asks you a series of questions: “1. Why is inflation costly?” “2. If inflation is so costly, why is it so common in modern economies? “3. Why can’t we just print money to pay the government’s bills?” “4. The chair of the US Federal Reserve Bank told me the other day that in the short run expansionary monetary policy reduces interest rates but in the long run faster growth of the money supply raises interest rates. Can you explain this to me?” Use any and all appropriate models to answer the senator’s four questions. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
4. Discuss the circumstances under which expansionary monetary policy has no effect on output in the short run. Discuss the circumstances under which expansionary fiscal policy has no effect on output in the short run. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
5. After the terrorist attacks on the US on September 11, 2001 there was a dramatic increase in demand for M1 as households desired to hold safe, liquid assets. Use graphs and words to analyze the effects of this shock on the economy in the short run if, i) the Fed does nothing, ii) if the Fed uses an interest rate targeting policy, iii) the Fed uses an output targeting policy. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
6. Savings (or the savings rate) is a part of every model of the macroeconomy we have studied this term. If savings (or the savings rate) increases, describe the effects in very long run growth models, the long run loanable funds model, and our short run model. Your answer should be one page typed with any and all appropriate mathematics, graphs and explanations.
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