ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Q1. Describe two ways through which the consolidated government (fiscal and monetary authorities) can finance a deficit.

Q2. The figure below shows the evolution of two different measures of inflation. Which of these series is showing the evolution of a measure of headline inflation, and which one is showing the evolution of a measure of underlying inflation? Justify your answer, and give an example of a measure of underlying inflation.

Q3. Consider the following quote by Ed Prescott: “The policy implication of [my] research is that costly efforts at stabilization are likely to be counterproductive.” Provide a brief justification of Prescott’s view based on the results of the Real Business Cycle Theory studied in class.

Q4.Provide one argument in favour and one argument against the following statement: “Ideally, it would be optimal to set the nominal interest rate to zero at all times.”

Q.5Evaluate the validity of the following claim: “Under a fixed exchange rate, the monetary authority looses its ability to implement independent monetary policy. Hence, a flexible exchange rate is always preferred to a fixed exchange rate.” Justify your answer.

Q6.Are current account deficits necessarily undesirable? Provide a brief justification.

0.15
Series 1
-... Series 2
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0.05
-0.05
-0.1E
-0.15
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1975
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2015
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2020
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Transcribed Image Text:0.15 Series 1 -... Series 2 0.1- 0.05 -0.05 -0.1E -0.15 1970 1975 1985 2000 2015 1980 1990 1995 2005 2010 2020 .....
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