1. Suppose a person
defects from Cuba (a country that generally disregards the use of markets) to
the United States and asks to see a market in action. Where would you take her?
Did you give her a complete showing of this market?
2. Answer the
a. What does GDP measure, and why is it a useful tool for
economists, business decision makers, and government policy makers?
b. Explain at least two important things GDP does not
3. What is the
natural rate of unemployment, and how does it relate to the concept of
potential (or full-employment) GDP?
4. How does the
aggregate goods and services market differ from the regular supply and demand
graph in Chapter 3? Address the measures of price, quantity, and the demand and
5. Which will cause a
larger short-run increase in prices: an anticipated or unanticipated increase
in aggregate demand? Will they cause the same increase in prices in the long
6. What three types
of timing problems might policy makers experience when conducting discretionary
7. How do new
classical economists differ from Keynesian economists in their assumptions
about how government borrowing affects household consumption and borrowing
8. Briefly explain
the three functions of money.
9. Discuss the
following views concerning the impact of monetary policy:
d. "modern view"
10. How has
macro-policy changed since the 1970s? How have the views of economists on the
trade-off between inflation and unemployment changed?