posted on Dec, 9 2009 @ 07:56 PM
Ok, heres what i'm stuck on at the moment. I know nobody can put graphs up, but if anyone can help me understand even one of these a little bit
better it would mean so much to me!
1. A friend argues that a stimulative fiscal policy will end up causing inflation and crowding out, without adding much other benefit to the economy.
You think you have a more sophisticated argument that favors some government spending.
A) Explain, verbally and with the appropriate graphs, your friend's view, showing how she may be correct. (In other words, why might inflation and/or
crowding out occur?)
B) Explain, verbally and with the appropriate graphs, your more sophisticated view. (In other words, why might inflation and/or crowding out NOT
occur, and why might economic growth result?)
2. A. The newspaper editors argue that the federal reserve should increase in the money supply to stimulate the economy, eventually shifting Aggregate
Demand. Assuming the world works the way the editors want it to, carefully explain how the Fed does it, making sure to discuss the role of banks. Show
graphically (though without numbers) how it should work.
B. A TV analyst enters the conversation and says, "I hate to divulge a big secret, but we are really unable to control the money supply much at all,
especially if we try to reduce it." Carefully explain, using prose and graphs, why she is correct, and what it implies about the shape of the money
3. Derive the Aggregate demand curve. In your derivation, carefully explain where the terms in aggregate demand come from.