Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
8th Edition
ISBN: 9781337607735
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 36, Problem 3PA
Subpart (a):
To determine
The problem of time inconsistency.
Subpart (b):
To determine
The problem of time inconsistency.
Subpart (c):
To determine
The problem of time inconsistency.
Subpart (d):
To determine
The problem of time inconsistency.
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Consider a country whose economic structure matches the assumptions of the classical model. After reading a recent best-seller documenting a growing population of low-income elderly people who were ill prepared for retirement, most residents of this country decide to increase their saving at any given interest rate. Explain whether or how this could affect the following:
a. The current equilibrium interest rate
b. Current equilibrium real GDP
c. Current equilibrium employment
d. Current equilibrium investment
e. Future equilibrium real GDP
Consider the following two alternative definitions of a recession:
1.A period of negative output growth.
2.A period when the output level is below the country's potential, or normal, level.
Now consider a country that has been producing a lot of oil, whose oil wells have suddenly run out.
This results in both its potential, and actual, output falling. Which of the following statements are
correct?
The policymaker using the second definition may underreact to the slowing output.
The policymaker using the first definition may underreact to the slowing output.
O According to the first definition, the country is now unambiguously in a recession.
O According to the second definition, the country is now unambiguously in a recession.
C1. What is meant by the "time inconsistency" of economic policy? Why might policymakers be tempted to renege on an announcement they made earlier? In this situation, what is the advantage of a policy rule?C2. What are the policy issues connected with economic growth?C3. Briefly describe how Modigliani's life-cycle hypothesis and Milton Friedman's permanent income hypothesis solve the consumption puzzle.C4. Is the government debt really a problem? Describe the traditional view and the Ricardian view.
answer all the parts please and correctly.
Chapter 36 Solutions
Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
Ch. 36.1 - Prob. 1QQCh. 36.2 - Prob. 2QQCh. 36.3 - Prob. 3QQCh. 36.4 - Prob. 4QQCh. 36.5 - Prob. 5QQCh. 36.6 - Prob. 6QQCh. 36 - Prob. 1CQQCh. 36 - Prob. 2CQQCh. 36 - Prob. 3CQQCh. 36 - Prob. 4CQQ
Ch. 36 - Prob. 5CQQCh. 36 - Prob. 6CQQCh. 36 - Prob. 1QRCh. 36 - Prob. 2QRCh. 36 - Prob. 3QRCh. 36 - Prob. 4QRCh. 36 - Prob. 5QRCh. 36 - Prob. 6QRCh. 36 - Prob. 7QRCh. 36 - Prob. 8QRCh. 36 - Prob. 9QRCh. 36 - Prob. 10QRCh. 36 - Prob. 1PACh. 36 - Prob. 2PACh. 36 - Prob. 3PACh. 36 - Prob. 4PACh. 36 - Prob. 5PACh. 36 - Prob. 6PACh. 36 - Prob. 7PACh. 36 - Prob. 8PA
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