Monetary and fiscal policy are government
attempts to smooth the business cycle, especially the use of expansionary
policies to return to GDP growth from a recession. The goals are relatively short-term, not more
than 5 years. Long-term growth, however,
is arguably more important and the subject of last section of the course.
1.
If natural resources are
ultimately finite, does this imply that there is a limit to per capita
GDP? Explain.

2.
The great economist Joseph
Schumpeter coined the term creative destruction to characterize the free
market economy. Why should governments
facilitate competitive markets and free international trade if competition is
inherently destructive?

3.
Should the national government
ensure income equality through taxation and wealth redistribution?

4.
According to Monetarists, what
is the long-term result of continuing expansionary monetary policy in which the
money supply grows faster than RGDP?
Briefly explain using the EOE.

5.
During a recession, politicians
and economists often speak of returning the nation to full employment. Does this mean zero unemployment? If not, why isnt zero unemployment
desirable?

6.
Relatively free trade exists
between the US and Mexico as a result of the North American Free Trade
Agreement (NAFTA). Should the Law of One
Price prevail in major consumer goods sold in the 2 countries? Explain.

7.
Suppose the United States has
an absolute advantage in the production of 2 goods compared to another country. Could it benefit in trade of these goods with
that country?

8.
Like the Great Depression of
the 1930s, the Great Recession of 2008 will be studied for many years. Many causes have been identified for both
periods. In a short paragraph, explain
one of the many causes of the Great Recession.

There are many possible answers.
Suggested weight: 16 %Monetary and fiscal policy are government
attempts to smooth the business cycle, especially the use of expansionary
policies to return to GDP growth from a recession. The goals are relatively short-term, not more
than 5 years. Long-term growth, however,
is arguably more important and the subject of last section of the course. 1.
If natural resources are
ultimately finite, does this imply that there is a limit to per capita
GDP? Explain.2.
The great economist Joseph
Schumpeter coined the term creative destruction to characterize the free
market economy. Why should governments
facilitate competitive markets and free international trade if competition is
inherently destructive?3.
Should the national government
ensure income equality through taxation and wealth redistribution?4.
According to Monetarists, what
is the long-term result of continuing expansionary monetary policy in which the
money supply grows faster than RGDP?
Briefly explain using the EOE.5.
During a recession, politicians
and economists often speak of returning the nation to full employment. Does this mean zero unemployment? If not, why isnt zero unemployment
desirable?6.
Relatively free trade exists
between the US and Mexico as a result of the North American Free Trade
Agreement (NAFTA). Should the Law of One
Price prevail in major consumer goods sold in the 2 countries? Explain.7.
Suppose the United States has
an absolute advantage in the production of 2 goods compared to another country. Could it benefit in trade of these goods with
that country?8.
Like the Great Depression of
the 1930s, the Great Recession of 2008 will be studied for many years. Many causes have been identified for both
periods. In a short paragraph, explain
one of the many causes of the Great Recession.
There are many possible answers. Suggested weight: 16 %