Assign7 - Intro Macro N Sheflin ASSIGNMENT 7 NOTES We take a look at fiscal policy the Fed and short-run monetary policy in the Keynesian model and

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I n t r o M a c r o N . S h e f l i n ASSIGNMENT 7 NOTES : We take a look at fiscal policy, the Fed and short-run monetary policy in the Keynesian model, and a glance at monetary theory (how money ‘matters’). Don’t worry about ( ignore ) any reference to long-run policy issues for now. We’ll come back to this in more depth later in the course. Also, we’ll play a short run monetary policy game– the Chairman’s game Don’t forget to buy stock in Investment Game Round 1 , and make sure to do the reading and study the questions – some of which will appear on the hw. Some more advice – Careers, Jobs, Etc. Due before class on Monday 3/1 READING Samuelson Chapter 7 section D (not too much here – the readings and my notes below are more helpful; ignore the 45 degree line analysis if you like), and chapter 10 sections A and B (skip C for now) And “What Would Keynes Have Done?” by Mankiw at http://www.nytimes.com/2008/11/30/business/economy/30view.html (remember, this was written in 2008) Fiscal Policy (2002) http://www.frbsf.org/publications/economics/letter/2002/el2002-26.html - ignore the long-run discussion for now. Fiscal Policy (2009) http://www.frbsf.org/publications/economics/letter/2009/el2009-20.html - ignore the expectations discussion. Focus on multipliers and facts about the fiscal stimulus package. Fed Actions in the Current Crisis http://www.federalreserve.gov/monetarypolicy/bst_crisisresponse.htm EXTRA (if you have time and energy) A very good, only somewhat dated introduction to Fed funds targeting “Setting The Interest Rate” http://www.frbsf.org/publications/economics/letter/2002/el2002-30.html (the main change is that the Fed adopted the passive discount rate policy mentioned, and in normal times, it is not set but rather moves with the funds rate). And more details on the Fed and Monetary Policy at: http://www.frbsf.org/publications/federalreserve/monetary/index.html MULTIPLE CHOICE QUESTIONS - Sakai Tests and Quizzes IN THE NEWS Fiscal/ Monetary policy, Structural deficits, Automatic Stabilizers, Goals, Tools, Targets of Fed Policy, Fed Funds Market APPLICATIONS 1. Select and explain 4 points/terms made in the latest FOMC statement found through http://www.federalreserve.gov/fomc/default.htm (goals, tools, targets, economic conditions) 2. Play the ‘Chairman’s Game” at: http://www.frbsf.org/education/activities/chairman/ a. click on “learn more”
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480 b. look at the videos at “policy in depth” c. look over the “economic dictionary” d. play the game – try to achieve the twin goals of stable prices and maximum employment i. what unemployment and inflation rates did you start with? End with? ii. What effect did raising the fed funds target rate have? Why? How quickly? BIG QUESTIONS
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This note was uploaded on 09/30/2011 for the course ECONOMICS 103 taught by Professor Sheflin during the Spring '08 term at Rutgers.

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Assign7 - Intro Macro N Sheflin ASSIGNMENT 7 NOTES We take a look at fiscal policy the Fed and short-run monetary policy in the Keynesian model and

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