In 2009, General Motors builds $500 million worth of cars, but consumers only buy
$470 million of them. Thus, 2009 GDP rises by 470 million.
Council for Economic Planning and Development (經建會) proposed a four-year
project to promote employment between 2009 and 2012. This project will ameliorate
(改善) the long-term unemployment problem that results from the changes in the
occupational structure of Taiwan.
An expansionary fiscal policy raises output. However, it hurts balance of (international)
payments.
According to the Taylor rule, the central bank should conduct contractionary monetary
policy when actual inflation rate is higher than target inflation rate.
In the classical model, fiscal policy actions do not influence aggregate demand, but in
the Keynesian theory, they do.
The short-run aggregate supply curve is more likely to be horizontal while the long-run
aggregate supply curve is more likely to be vertical. (Consider this argument as an
agreement among both Keynesian and Classical economists.)
If the quantity of money demanded exceeds the quantity of money supplied, then the
quantity of nonmonetary assets demanded exceeds the quantity supplied.
Economic Growth Model
What is Solow growth model? What are the basic assumptions? (3%)
Economic Growth Model
Use the Solow growth model to explain why we observe per capita output increases
overtime. (4%)
Economic Growth Model
What are the major differences between endogenous growth models and the Solow
growth model? (4%)
Illustrate and explain the “Policy Ineffectiveness Theorem.” (5%)
Derive the quantity of labor demand. (5%)
Consider an economy in which the desired investment is very interest-inelastic, the
demand for money is very interest-elastic, and the autonomous spending multiplier is
known to be relatively small.
Is the IS curve flat or steep? Is the LM curve flat or steep? (4%)
Consider an economy in which the desired investment is very interest-inelastic, the
demand for money is very interest-elastic, and the autonomous spending multiplier is
known to be relatively small.
Now suppose the central bank increases the nominal money supply. Graphically
illustrate and explain in detail what effect this event will have on the IS-LM and
AD-AS curves, on the interest rate, on the real output, and on the aggregate price.
(Assume that the AS curve slopes upward.) Does the effect on real output tend to be
large or small? (9%)
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