Singapore has a saving rate that is roughly three times greater than that of the United States. Its greater saving rate has been one reason why the Singapore economy has grown faster than the U.S. economy. Suppose that if the United States increased its saving rate to, say, twice the Singapore level, U.S. growth would surpass the Singapore rate. Would that be a good idea?
Consider the market demand and supply given by the following: Qd = 50 – P and Qs = 2.5 + 1.5P. Use this information to answer the following questions.
Consider the benefit and cost of Mr. T's Coffee Shop, which are indicated by the following: B(Q) = 50 + 18Q – 2Q2 and C(Q) = 40 + 6Q. Use this information to answer the following questions.
In what way does the existence of near money complicate the conduct of monetary policy? How has the Federal Reserve responded to this complication?
1) "Twin deficits" refers to a situation, where the government budget deficit
A. leads to a capital account deficit.
B. leads to a current account deficit.
C. leads to a balance of payment deficit.
D. leads to a financial account deficit.
Explain how each of the developments listed in (a) through (d) would affect the demand for M1 and M2.
a. Banks reduce penalties on early withdrawal from time deposits.
b. The government forbids the use of money market funds for check-writing purposes.
c. The government legislates a tax on all ATM transactions.
d. Congress decides to impose a tax on all transactions involving government securities with maturities of more than one year
following statements true, false, or uncertain. Explain briefly.
a. The most important argument in favor of a positive rate of inflation in OECD countries is seignorage.
b. The Fed should target M2 growth because it moves quite closely with inflation.
c. Fighting inflation should be the Fed’s only purpose.
d. Because most people have little trouble distinguishing between nominal and real values, inflation does not distort decision making.
e. The Fed announced an inflation target of 2% in early 2012.
f. The higher the inflation rate, the higher the effective tax rate on capital gains.
g. The Taylor rule describes how central banks adjust the growth rate of money across recessions and booms.
h. The only policy tools available to central banks are interest rates and the money stock
What is meant by the "germ theory of disease" as it applies to the economics of poor nations? What would such a theory look like? Why is it important for economists to discover such a theory?
The United States has experienced continuous current account deficits since the early 1980s. What do you think are the main causes for the deficits? What would be the consequences of continuous U.S. current account deficits?