ps9ans - ECON 305 INTERMEDIATE MACROECONOMICS SPRING 2011...

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ECON 305: INTERMEDIATE MACROECONOMICS SPRING 2011 MARK MOORE PROBLEM SET 9 SOLUTIONS A. CHAPTER 25 4. a. The unemployment rate will remain equal to the natural rate. b. It is unlikely that the central bank will be able to hit its target every period. There will be surprises, and there are lags and uncertainty in policymaking. c. Changes in the natural rate will make it more difficult for the Fed to hits its target. It will be harder to distinguish changes in the actual rate of unemployment from changes in the natural rate of unemployment. Dig Deeper 5. Discussion question. B. CHAPTER 26 Quick Check 1. a. True. b. False. c. False. d. False. e. False. f. False 2. First, even a temporary deficit leads to an increase in the national debt, and therefore to higher interest payments. This, in turn, implies continued deficits, higher taxes, or lower government spending in the future. Second, the evidence does not support the Ricardian equivalence proposition. Third, if Ricardian equivalence did hold, then government spending would have the same effect on
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This note was uploaded on 05/26/2011 for the course ECON 305 taught by Professor Dekle during the Spring '07 term at USC.

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ps9ans - ECON 305 INTERMEDIATE MACROECONOMICS SPRING 2011...

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