1. All economic models—indeed all models in science—distinguish between exogenous and endogenous variables. Using examples and economic history, explain carefully the difference between an exogenous variable and an from economics endogenous variable. 2. Which one of these macroeconomic variables—(a) the inflation rate, (b) the interest rate, (c) the labor force participation rate, or (d) the unemployment rate—measures the rate of change of a variable? Explain your answer.

1. All economic models—indeed all models in science—distinguish between exogenous and endogenous variables. Using examples and economic history, explain carefully the difference between an exogenous variable and an from economics endogenous variable.

2. Which one of these macroeconomic variables—(a) the inflation rate, (b) the interest rate, (c) the labor force participation rate, or (d) the unemployment rate—measures the rate of change of a variable? Explain your answer.

3. Who gets helped by unanticipated inflation: people who owe money or people who lend money? Explain your answer.

4. Distinguish carefully between monetary policy and fiscal policy, and illustrate your answer with regard to the United States.

5. Define the concept of price flexibility. Do flexible prices make it easier or more difficult for an economy to avoid business cycles? Explain your answer.

6. If you owned a bank, would you rather that it be (a) illiquid, or (b) insolvent? Explain your answer.

7. If interest rates fell, would you expect that house prices would (a) rise, or (b) fall? Explain your answer.

8. Imagine the federal government were to cut the marginal rate of income tax on people’s earnings from work. Why might this policy reduce tax revenue in the short run yet increase tax revenue in the long run? Explain your answer.

9. Distinguish between a progressive tax system and a regressive tax system. Consider two categories of people—the rich and the poor. Who—the rich or the poor—pay more tax under a progressive tax system? Who pay more tax under a regressive tax system? Who pay a higher percentage of their taxable income under a progressive tax system? And who pay a higher percentage of their taxable income under a regressive tax system? Explain your answers.

10. Explain the difference between (a) output per worker and (b) output per hour (two measures of productivity). Under what circumstances would (a) rise faster than (b)? Explain the difference between (a) output per worker (a measure of productivity) and (c) output per person (a measure of the standard of living). Under what circumstances would (a) rise faster than (c)?
A 1800-word paper (that’s an average of 180 words per answer, and some answers require many fewer and others may need more) without a cover sheet would fill 5-7 pages depending on the spacing between paragraphs
It’s due at 8 am

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