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Macro discussion questions

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1. Given the demand for and the supply of a commodity that you yourself consume on a regular basis, i.e., I might choose coffee, what price will be the equilibrium price of this commodity? Explain why this price will tend to prevail in the market and why higher (lower) prices, if the do exist temporarily, will tend to fall (rise). Provide an example. 20 Possible Points. Provide references in APA format.

2. Explain the fiscal policies that would be advocated during a recession and during a period of inflation by those who (a) wish to expand the public sector and (b) wish to contract the size of government. Give an example. Then, assuming you are the President of the US today what policies would you implement and why? 20 Possible Points. Provide references in APA format.

3. Explain how the Board of Governors and the Federal Reserve Banks can influence income, output, employment, and the price level. In your explanation, employ the following concepts: reserves, excess reserves, the supply of money, the availability of bank credit and the rate of interest. Then tell us what if any of these tools the fed is implementing presently and why or why not? Provide an example. 20 Possible Points. Provide references in APA format.

4. What types of events cause the exchange rate for a foreign currency to appreciate or to depreciate? How will each event affect the exchange rate for a foreign currency and for a nation's own currency? Give current examples along with your explanation. 20 Possible Points. Provide references in APA format.

5. Explain how public interest regulation can lead to increased costs and economic inefficiency as it is practiced by US commissions and agencies (our Government). Using your research skills give an example to supplement your response. 20 Possible points. Provide references in APA format.

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1. The equilibrium price is the one which establishes the quantity buyers are willing to support. Sellers are always will to produce more of a good at a higher price. But buyers are constrained by their incomes and the need to purchase other goods as well. If a coffee producer has a large crop and offers a great deal of coffee, buyers who can pay the least will offer him a low price. He will accept this price so that his coffee isn't wasted. The next year, however, he will want to reduce the amount of coffee he produces, because he was forced to sell for such a low value. If he produces a small crop, and sets a high price, the wealthiest buyers will pay it and exhaust his supply. He may realize that he could make a profit by producing a crop somewhere in between these values. The process will continue until he produces a crop of exactly the right size - when it's gone, so are all the buyers who were willing to pay the price he wanted. Any other price will cause him to produce more, driving prices down, or to produce less, causing prices to rise.

2. To expand the economy, the government need to increase ...

Solution Summary

Exchange rate, federal reserve, fiscal policy, and equilibrium price determination

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What is the impact of a trade deficit on the exchange rate value of the dollar? Address the economic motivations underlying international trade. Provide an actual (real-world) example that could be used to demonstrate the price inelasticity of demand for a given good.

D Q week 5
1. What is the impact of a trade deficit on the exchange rate value of the dollar? Make sure you explain how transactions in the foreign exchange market (as a result of the trade deficit) result in price pressures placed on this change exchange rate.

2. Address the economic motivations underlying international trade. Under what circumstances would two countries have no incentives to trade?

3. Provide an actual (real-world) example that could be used to demonstrate the price inelasticity of demand for a given good. Be sure to provide a quantitative definition of price inelastic demand as well as support for the real-world example you provide.

4. What is the purpose of anti-trust legislation? In your answer, be sure to include explicit benefits that can be realized by consumers as a consequence of the enforcement of this legislation. What are some potential costs (to consumers)?

5. Explain the Keynesian perspective with respect to deficit spending by the federal government.

6. Assume the banking system is in reserve equilibrium. The Fed conducts an open market purchase of Treasury securities in the amount of $1 billion. The reserve requirement against deposits is 10%. Identify the potential amount of the money supply increase as a consequence of the Fed's action and describe fully how money is created by the banking system subsequent to the Fed's open market purchase of Treasury securities in the amount of $1 billion.

7. Why does the Monetarist school of economic thought maintain that monetary stimulus is doomed to be ineffective in the long run?

8. Identify and explain significant aspects associated with the task of measuring unemployment. What people are not counted as being unemployed in the U.S. economy? Note: Do not merely describe how the unemployment rate is calculated; instead, make sure you explain the problems associated with measuring the unemployment rate.

9. A country operates under a flexible exchange rate system and is experiencing a deficit in its Current (trade) Account. Ignoring all other Balance of Payments categories, what should be the net effect of the trade deficit on the country's Capital Account? Explain.

10. Explain why, at one point in time, a Keynesian approach to managing the macro-economy might be appropriate while, at another point in time, a Classical approach might be more likely to produce a superior outcome. Make sure the outcome you address includes inflation and employment issues.
11.

What are the advantages and limitations of International Trade
b. What are the effects on international trade on the U.S. economy?
c. Explain how changes in fiscal and monetary policies affect exchange rate.

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