Econ 116 Problem Set 4 Due October 1, 2013
1. Why does the AS curve slope up, at least in the short run?
The AS curve slopes up because a higher price level is associated with higher output. When wages
and prices do not change, firms increase output as pr
Problem Set 8
November 5, 2013
Balance of Payments
List the following transactions in the current account and capital account of the United
States. Denote under which category they are listed and whether they are a credit or a
1. A U.S. ci
Problem Set 9
November 12, 2013
1. Say that in the quarter following a depreciation of country As currency its
current account worsens. Is this inconsistent with the theory that depreciation
increases a countrys exports and decreases it imports?
Problem Set 11
December 3, 2013
1. What assumptions are needed in order for the quantity theory of money to hold?
How do these assumptions differ from those behind the AS/AD model?
It assumes that velocity is fixed and that o
Problem Set 10
November 19, 2013
1. There are a number of small countries in the world that fix their exchange rate to
another currency (dollar, euro, etc.). Choose one of these countries and discuss how
it is doing economicallyreal output, infla
Problem Set 5
October 8, 2013
More on the AS-AD Model
1. If there is a zero interest rate lower bound, is fiscal policy more or less effective than
otherwise. Explain carefully using the AS/AD model.
Fiscal policy is more effective when there is
Econ 116 PSET #7
October 31, 2013
1. COG increase by $100 billion
GDPR: real GDP increased
o When G increases, output also increases. The multiplier is bigger than one
because output increases when income and investment increase. An
increase in G results
Econ 116 Problem Set 6
October 15, 2013
1. Why did the surprise announcement of the Fed a couple of weeks ago lead to an
immediate fall in the ten-year government bond rate? Explain carefully.
The Fed announced it was postponing a retreat from the monetar