What is stagflation and why does cost-push inflation cause stagflation?
> Suppose that the velocity of circulation of money is constant and real GDP is growing at 3 percent a year. a. To achieve an inflation target of 2 percent a year, at what rate would the central bank grow the quantity of money? b. At what growth rate of th
> The economy starts out on the curves labelled AD0 and SAS0 Some events occur and the economy is expected to experience inflation.What might those events have been? Describe their initial effects and what happens as an expected inflation proceeds. L
> The economy starts out on the curves labelled AD0 and SAS0. Some events occur and the economy experiences a cost-push inflation. What might those events have been? Describe their initial effects and explain how a cost-push inflation spiral develops.
> The economy starts out on the curves labelled AD0 and SAS0. Some events occur and the economy experiences a demand-pull inflation. What might those events have been? Describe their initial effects and explain how a demand-pull inflation spiral results.
> On top of rising energy prices, a severe drought, bad harvests, and a poor monsoon season in Asia have sent grain prices soaring. Globally, this is the third major food price shock in five years. Explain what type of inflation the news clip is describing
> How can deflation be ended?
> What is the cause of the high unemployment rate? One side says there is not enough government spending. The other says it’s a structural problem—people who can’t move to take new jobs because they are tied down to burdensome mortgages or firms that can’t
> If the expected inflation rate increases by 10 percentage points, how do the short-run Phillips curve and the long-run Phillips curve change?
> How would you use the Phillips curve to illustrate an unexpected change in inflation?
> The pace of German economic growth has weakened “markedly,” but the reason is the weaker global prospects. Although German policymakers worry about the country’s exposure to a fall in demand for its export goods, evidence is growing that the recovery is
> Answer the following questions. a. What are the macroeconomic problems in the Eurozone economy that the ECB is seeking to address? b. Is the European unemployment problem structural, cyclical, or both, and how can we determine its type? c. Explain which
> Despite higher-than-forecast inflation, Bank of Canada Governor Mark Carney said he may keep interest rates low beyond when full output is restored as the domestic recovery is hobbled by a weak economy in the United States, the nation’s biggest trade par
> The indication is that inflationary expectations have become entrenched and strongly rooted in world markets. As a result, the risk of global stagflation has become significant. A drawn-out inflationary process always precedes stagflation. Following the
> The Reserve Bank of New Zealand signed an agreement with the New Zealand government in which the Bank agreed to maintain inflation inside a low target range. Failure to achieve the target would result in the governor of the Bank losing his job. Explain h
> The Reserve Bank of New Zealand signed an agreement with the New Zealand government in which the Bank agreed to maintain inflation inside a low target range. Failure to achieve the target would result in the governor of the Bank losing his job. Explain h
> An economy has an unemployment rate of 4 percent and an inflation rate of 5 percent a year at point A in the figure. Then some events occur that move the economy from A to B to D to C and back to A. In the graph, draw the sequence of the economyâ&
> What causes deflation?
> An economy has an unemployment rate of 4 percent and an inflation rate of 5 percent a year at point A in the figure. Then some events occur that move the economy from A to B to D to C and back to A. Describe the events that could create this sequence. H
> The United States is planning to push Europe towards new and more aggressive efforts to boost aggregate demand given a renewed risk of deflation in the Eurozone. a. Explain the process by which deflation occurs. b. How might Europe boost its aggregate de
> What are the consequences of deflation?
> John H. Cochrane, a professor of finance at the University of Chicago, thinks we face the risk of inflation, and if inflation does break out the Fed will not have the ability to stop it and it will “bring stagnation rather than prosperity.” The source of
> For most of the last century, wages and productivity— the key measure of the economy’s efficiency— have risen together, increasing rapidly through the 1950s and ’60s and far more slowly in the 1970s and ’80s. But in recent years, the productivity gains h
> Suppose that the Canadian business cycle is best described by RBC theory and that a new technology increases productivity. Explain the when-to-work decision when technology advances.
> Suppose that the Canadian business cycle is best described by RBC theory and that a new technology increases productivity. Draw a graph to show the effect of the new technology in the labour market.
> Suppose that the Canadian business cycle is best described by RBC theory and that a new technology increases productivity. Draw a graph to show the effect of the new technology in the market for loanable funds.
> How does the quantity theory of money help us to understand the process of deflation?
> How do real GDP and the price level change if the forecast of inflation is incorrect?
> What is deflation?
> How does expected inflation occur?
> What are the main criticisms of RBC theory and how do its supporters defend it?
> According to RBC theory, how does a fall in productivity growth influence investment demand, the market for loanable funds, the real interest rate, the demand for labour, the supply of labour, employment, and the real wage rate?
> What must happen to create a demand-pull inflation spiral?
> What are the four special forms of the mainstream theory of the business cycle and how do they differ?
> Explain the mainstream theory of the business cycle.
> Use the information on the Noth American wholesale market for roses in Problem 1. Who gains and who loses from this import quota? Information from Problem 1 is as follows: Wholesalers buy and sell roses in containers that hold 120 stems. The table prov
> Use the information on the Noth American wholesale market for roses in Problem 1 If an import quota of 5 million containers is imposed on roses, what happens to the North American price of roses, the quantity of roses bought, the quantity produced in Nor
> Use the information on the Noth American wholesale market for roses in Problem 1. Who gains and who loses from this tariff? Information from Problem 1 is as follows: Wholesalers buy and sell roses in containers that hold 120 stems. The table provides da
> What is offshore outsourcing? Who benefits from it and who loses?
> How does cost-push inflation begin?
> Explain the effects of an import quota on domestic production, consumption, and price.
> Explain the effects of a tariff on domestic production, the quantity bought, and the price.
> What are the tools that a country can use to restrict international trade?
> How is the gain from exports distributed between consumers and domestic producers?
> How is the gain from imports distributed between consumers and domestic producers?
> With free trade between Australia and Canada, Australia would export beef to Canada. But Canada imposes an import quota on Australian beef. Explain who in Canada gains from the quota on beef imports and who loses.
> With free trade between Australia and Canada, Australia would export beef to Canada. But Canada imposes an import quota on Australian beef. Explain how this quota influences the price that Canadian consumers pay for beef, the quantity of beef produced in
> Suppose that in response to huge job losses in the Canadian textile industry, the Canadian government imposes a 100 percent tariff on imports of textiles from China. Explain how the Canadian and Chinese gains from trade will change. Who in Canada will lo
> Suppose that in response to huge job losses in the Canadian textile industry, the Canadian government imposes a 100 percent tariff on imports of textiles from China. Explain how the tariff on textiles will change the price that Canadian buyers pay for te
> Suppose that in 2014 tomato growers in Ontario lobby the Canadian government to impose an import quota on Mexican tomatoes. Explain who in Canada would gain and who would lose from such an import quota.
> Before 1995, trade between Canada and Mexico was subject to tariffs. In 1995, Mexico joined NAFTA and all Canadian and Mexican tariffs have gradually been removed. Explain how the quantity of Canadian exports to Mexico and the Canadian government’s tarif
> A semiconductor is a key component in your laptop, cellphone, and iPod. The table provides information about the market for semiconductors in Canada. Producers of semiconductors can get $18 a unit on the world market. a. With no international trade, wha
> What does the Bank of Canada do to determine whether the overnight loans rate should be raised, lowered, or left unchanged?
> If the Bank of Canada started to raise the overnight loans rate in 2015, explain the process by which this policy action would change real GDP.
> With low interest rates, business investment and trade are expected to bring growth through 2016. What actions might the Bank of Canada take to stimulate business investment further?
> With low interest rates, business investment and trade are expected to bring growth through 2016. Explain the effects of business investment on aggregate demand. Would you expect it to have a multiplier effect? Why or why not?
> Why was the U.S. recovery from the 2008–2009 recession so slow?
> What are the policy actions taken by central banks in response to the financial crisis?
> What are the three ingredients of a financial and banking crisis?
> How is the overnight rate determined in the market for bank reserves?
> What must happen to create a cost-push inflation spiral?
> What is the Bank of Canada’s record in achieving its inflation-control target?
> Inflation targeting promotes well-anchored inflation expectations, which facilitates more effective stabilization of output and employment. Thus inflation targeting can deliver good results with respect to output and employment as well as inflation. Expl
> What are the two parts of the inflation-control target?
> At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 percent, the inflation rate was 2.1 percent, and the over
> At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 percent, the inflation rate was 2.1 percent, and the over
> Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the United States would be plunged into a Japan-style slump, with house prices declining for years. Describe the time lags in the response of
> In the 1980s, it was Argentina, Mexico, and the Philippines that struggled with unsustainable debt loads. In the 1990s, it was Russia and the go-go economies of East Asia. Today, it is the United States, Japan, and Europe. How was Canada’s budget deficit
> The Bank of Canada and the Government of Canada have agreed that the Bank will achieve an inflation rate target. Explain the conflict between inflation targeting and unemployment targeting in the short run.
> From 2007 to 2009, the long-term real interest rate paid by the safest corporations increased from 2.3 percent to 3.8 percent. During that same period, the overnight loans rate fell from 4.5 percent to 0.25 percent a year. What do you think happened to i
> The Bank of Canada and the Government of Canada have agreed that the Bank will achieve an inflation rate target. Explain how inflation targeting promotes full employment in the long run.
> According to RBC theory, what is the source of the business cycle? What is the role of fluctuations in the rate of technological change?
> Jim Flaherty tabled a 2011 budget with a deficit for this year gradually falling to a surplus in 2015. Mr. Flaherty said the budget aims to find that balance between helping Canadian families and businesses and securing economic growth. What would be the
> What fiscal policy action might increase investment and speed economic growth? Explain how the policy action would work.
> Why might fiscal stimulus crowd out investment?
> How can the federal government use discretionary fiscal policy to stimulate the economy?
> What is the distinction between automatic and discretionary fiscal policy?
> Why are consumption taxes relevant for measuring the tax wedge?
> How does the tax wedge influence potential GDP?
> China’s economy is slowing from its normal 9 percent or higher economic growth rate to just below 9 percent. The source of the slowdown is the global economic slowdown that is restricting exports growth and the government’s deliberate decision to discour
> China’s economy is slowing from its normal 9 percent or higher economic growth rate to just below 9 percent. The source of the slowdown is the global economic slowdown that is restricting exports growth and the government’s deliberate decision to discour
> How does a tax on labour income influence the equilibrium quantity of employment?
> What is the distinction between deflation and a one-time fall in the price level?
> Explain the connection between a government budget deficit and a government debt
> U.S. regulators ordered the recall of more than 450,000 faulty tires. The Chinese producer of the tires disputed the allegations and hinted that the recall might be an effort to hamper Chinese exports to the United States. a. What does the news clip impl
> Use the information on the Noth American wholesale market for roses in Problem 1. Draw a graph to illustrate the effects of the import quota. On the graph, identify the the importers’ profit. Information from Problem 1 is as follows: W
> Use the information on the Noth American wholesale market for roses in Problem 1. Draw a graph of the North American market for roses to illustrate the effects of the tariff. On the graph, identify the tariff revenue from imported roses. Information fro
> Use the information on the Noth American wholesale market for roses in Problem 1. If a tariff of $25 per container is imposed on imports of roses, explain how the price of roses, the quantity of roses bought, the quantity produced in North America, and t
> Use the information on the North American wholesale market for roses in Problem 1 to: a. Explain who gains and who loses from free international trade in roses compared to a situation in which North Americans buy only roses grown locally. b. Calculate th
> Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America. The demand schedule is the wholesalers’ demand and the supply schedule is the North America
> William Watson, an economics professor at McGill University, Montreal, says there’s nothing magical, mystical, or personal about job creation. It occurs when someone who wants to sell a product or service contracts with someone else to help them do it. I
> Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America. The demand schedule is the wholesalers’ demand and the supply schedule is the North America
> Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America. The demand schedule is the wholesalers’ demand and the supply schedule is the North America
> Why don’t the winners from free trade win the political argument?
> What are the main reasons for imposing a tariff?
> Can protection save jobs and the environment and prevent workers in developing countries from being exploited?
> What are the infant industry and dumping arguments for protection? Are they correct?
> Explain who gains and who loses from an import quota and why the losses exceed the gains.
> Explain who gains and who loses from a tariff and why the losses exceed the gains.
> Why is the net gain from international trade positive?
> Describe the situation in the market for a good or service that Canada exports.
