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hw4 handout - economic growth 5 All else equal does a...

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ECON 2301.002 Principles of Macroeconomics Spring 2008 Homework 4 Due: April 22 at 1:00pm. 1. Explain, using AD/AS, what happens to prices if the fed expands the money supply during a period of cost-push inflation. 2. Explain, using AD/AS, what happens to unemployment if the fed decreases the money supply during a period of cost-push inflation. 3. Banks hold loans; i.e., pieces of paper where someone has agreed to make payments to the owner of the piece of paper. Are these assets or liabilities? With the foreclosure crisis, what has happened to the value of these pieces of paper? Explain how the fed can compensate for the change in value using monetary policy. 4. Explain why allowing firms to accelerate depreciation on capital might be good for
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Unformatted text preview: economic growth. 5. All else equal, does a relatively flat (responsive) AD curve indicate a large or small MPC? Explain. 6. During 1997, stock markets in Asia collapsed. Hong Kong’s was down nearly 30 percent, Thailand’s down 62 percent, and Malaysia’s down 60 percent. Big drops were also experienced in Japan and Korea. a. What impacts would these events have on the economies of the countries themselves? b. What ways would you expect these events to influence the U.S. economy? 7. Illustrate graphically and in words how a large increase in the NASDAQ Composite Index might impact inflation and the overall price level....
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