OTHER READINGS FOR TOPIC 9:
Contemporary Economic Problems and the Role of Stabilization Policy
- Heilbroner, Chapters 6, 7, 10
- Blinder, Chapters 2 – 3
- Friedman and Friedman, Chapters 3, 4, 9 and 10
- Schultze, Memoranda 12, 15-19, and 29
- Federal Reserve Bank of St. Louis, “In Plain English: Making Sense of the Federal Reserve“
- 2003 Economic Report of the President, especially Chapters 1 & 2 (in PDF format)
- The Council of Economic Advisors
- The National Economic Council
- Congressional Budget Office
- Federal Reserve Board and Regional Federal Reserve Banks
STUDY QUESTIONS FOR TOPIC 10:
- Define the essential characteristics of, and compare and contrast:
Classical Economics, Keynesian Economics, Monetarist Economics, Supply Side Economics.
- Which school of thought seems most convincing to you? Why?
- What is a recessionary gap? What is an inflationary gap?
- What is fiscal policy?
- Differentiate between discretionary fiscal policy and automatic stabilizers.
- How can fiscal policy be used to correct recessionary and inflationary gaps?
- What is the crowding out effect? How can the crowding out effect be avoided?
- What is the Federal Reserve?
- What determines the money supply?
- How does the Fed control the money supply?
- What are the three tools at its disposal and how do they work?
- What is the money multiplier?
- What is the demand for money? What determines the demand for money?
- What is monetary policy?
- What is the monetary mechanism; i.e. exactly how does monetary policy affect economic activity?
- How can monetary policy be used to correct recessionary and inflationary gaps?
- What is wrong with budget deficits?
- How do budget deficits affect the economy in the short run and the long run?
- What causes inflation? What causes unemployment? What are the different types of unemployment?
- What can be done to reduce inflation and unemployment?
- What is the Phillips Curve? What is the Natural Rate Hypothesis?
- Can the government trade-off inflation against unemployment?
- Does the government ever attempt to do this?