1.
Monetary
and fiscal policy instruments are used to affect the aggregate demand (AD) in
the economy.
a. What is the difference between contractionary and
expansionary monetary policy? What is the difference between contractionary and
expansionary fiscal policy? How does each policy affect the AD in the economy?
b. What are the benefits and major
problems of the fiscal policy and monetary policy?
2.
There
is a short-run tradeoff between inflation rate and unemployment rate. In the
short-run the tradeoff of between inflation rate and unemployment rate creates
a challenge for macroeconomic policymakers.
a. If you were macroeconomic policymaker, how do you balance
the short-run tradeoff between inflation rate and unemployment rate? Explain.
b. What is the historical
relationship between rates of unemployment and inflation in the U.S. economy?
What are the most current figures for the unemployment rate and the inflation
rate? What does this say about the U.S. economy today?
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