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~ Final Exam Review Questions ~


~ Draft Version ~


1)  T/F, Explain. The video "The Fed Today" informed us that the Federal Reserve System was created only for the purpose of 'regulating and supervising the banking system' to prevent bank failures. A visit to the "Board of Governors of the Federal Reserve", and the   "The Federal Reserve Banks" may be instructive.



2) The New York Times recently reported: "Fed Cuts Rate By Another Quarter Percent" Why would the 'Federal Reserve' conduct an "Easy Money" Policy at this time? Explain how the "Fed's Policy" might affect the economy? Also, Illustrate with the "AD & AS" Model, the "Money Market Model", and the "Gov't Securities Market Model" - see "Guide to the Gov't Securities Market". Review the 'latest' Economic Performance Indicators: FEDSTATS, Economic Indicators, Current Economic Data, and FedViews.


3)  Review the "Value of the Firm" Model and recall our class discussion of the "Stock Market & Interest Rates". Also, consider how important the 'control' of interest rates is to the conduct of Monetary Policy. In view of the above, explain how Chairman Ben Bernanke   and 'The Fed' can affect the 'Stock Market'? In addition, recall Burton Malkiel's "Wall Street Moves Main Street" and his explanation of how stock prices influence the real economy. Lastly, note the "three paths" of influence and explain how changes in 'stock prices' ("Wall Street") can affect the 'real economy' ("Main Street").


4)  During a recession, 'Fiscal Policy' in the form of discretionary policy. For example, the current "Stimulus Package" and the proposed "American Colleges and Universities 'Stimulus' Package" can be used to supplement the built-in stabilizers and alter the level of aggregate expenditure in order to achieve 'potential output' - a full employment level of GDP in the 'short-run'- and have a favorable influence on the supply side in the 'long-run'. Briefly explain and illustrate with the "AD & AS Model" (consider both 'Demand Side' and 'Suppy Side') the 'likely effect' of a "Higher Education Stimulus Package" on our economy. In addition, briefly explain and illustrate with the "Loanable Funds Model", possible implications for 'interest rates'.Think: "Crowding-in" and "Crowding-out". For more on 'Fiscal Policy' see:  "Budget, Deficit and Debt Charts" , "Whitehouse Budget Briefing" ,  "The Federal Budget" . "Budget of the United States Government" , "Office of Management and Budget", "The Bureau of Public Debt" .


5)  Marx's "Model of Capitalism" (M - C ...P... C* - M* ), can be helpful in organizing our thoughts about the economy and is a useful 'framework' for understanding the "motion" of our economy. With respect to our economy's "motion", it has been recently reported by some observers believe that "Stagflation" may be just around the corner. Apply this 'framework' to the issues of Unemployment and Inflation. Be specific and note the 'problems' associated with these "twin evils". Lastly, consider "Time To Get To Work" and comment on the author's "Employer of Last Resort" proposal. Review the following: "How Low Wages Damage Us All" , "A Brief Primer on Inflation Theory", and "Helping the Unemployed" .


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"Take a Ride on the Real Estate Roller Coaster"
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