Homework Due Tues. 3/24

 1. The unemployment rate in the country of Southland is greater than the natural rate of unemployment.


(a) Using a correctly labeled graph of aggregate demand and aggregate supply, show the current equilibrium real gross domestic product, labeled YC, and price level in Southland, labeled PLC. The president of Southland is receiving advice from two economic advisers—Kohelis and Raymond—about how best to reduce unemployment in Southland.


(b) Kohelis advises the president to decrease personal income taxes. (i) How would such a decrease in taxes affect aggregate demand? Explain. (ii) Using a correctly labeled graph of the short-run Phillips curve, show the effect of the decrease in taxes. Label the initial equilibrium from part (a) as point A, and the new equilibrium resulting from the decrease in taxes as point B.


(c) Raymond advises the president to take no policy action. (i) What will happen to the short-run aggregate supply curve in the long run? Explain. (ii) Using a new correctly labeled graph of the short-run Phillips curve, show the effect of the change in the short-run aggregate supply you identified in part (c)(i).

Ch. 15 Reading Guide

Due Tues:


1.  Study the roles/responsibilities of the components of the Federal Reserve from today's class.


2.  Define each of the  Federal Reserve's monetary policy tools:
a.  Open-market operations
b.  Reserve ratio (requirement)
c.  Discount rate


3.  Define easy money policy and tight money policy.




Due Wed:


1.  Graph the sequence of events that transpire when the Fed implements monetary policy.  Use a money market, investment demand curve, and finally an AS/AD diagram.  Complete this task for.
a.  Easy money policy starting at a recessionary gap
b.  Tight money starting at an inflationary gap.
Textbook page 279 will assist you with any problems.




Due Thurs:
Not in your textbook.  Be resourceful! 


1.  Who was Milton Friedman and what were some of his popular ideas/theories?
2.  Explain "Monetarism"






Friday will be a catch up/summary/review day.  The Monetary Policy Exam will take place on Monday, 3/9.  This test will include elements of Ch. 13, 14, and (primarily) 15.  You will need study for this one.  Start early.