Do 10 questions.
Note: Required questions are # 1, 4, 6, 10 & 22.
Each answer should be 2-3 pages including graphics, definitions, analysis, etc.
For all questions, include context, graphical
illustrations and calculations to support your answers.
When answering, think as a CFO / Manager.
1. Required: Identify the relationship of prices, value of money, and monetary
equilibrium? What happens to the value of money, price level, interest
rates, GDP and currency with continued monetary injections? What can we learn
from history regarding economies, which experienced hyperinflation and
deflation as it relates to the execution of prudent monetary policy? Quantity
Theory of Money, Money
Demand & Money Supply Determinants ***See attached graph***
2. As a
Manager….define the “costs” of
inflation / deflation on consumers, firms, society, allocation of resources,
redistribution of wealth (debtor versus creditor) and tax behavior distortions
(capital gains, interest income). Comment on the following statements…”Inflation is bad, but deflation may be
worse)”…and…”inflation is always and everywhere a monetary phenomenon”.
are the monetary policy considerations, which the Federal Reserve is pursuing in
the current COVID / Post environment? What are their objectives? Focus your
analysis on the various tools of the “FED”, i.e. open market operations, interest
on excess reserves, interest rates, employment and inflation. Does consideration of fiscal policy come
into “play” when pursuing prudent monetary policy strategy? Why?
4. Required: Identify the effect of inflation / deflation on
interest rates (short / long term), and on each of the components of GDP,
namely C, I, G and NX (i.e. net exports including domestic currency valuation).
The Aggregate Model of the Macro Economy
is the relationship between Net Exports
(X-M) and Net Capital Flows. Explain how and why they are related? If the
FED commenced printing large quantities of U.S. dollars, what could happen to
the number of Japanese yen a dollar ($) could by? How would that impact a
nation’s currency value and exports? Export versus Import
6. Required: Describe the FED’s
tools of monetary control and how it can either direct / indirectly influence money supply and the
monetary base? How does the FED’s tools
and commercial banking oversight direct monetary policy, interest rates,
liquidity and overall aggregate demand (GDP).
factors Influence the spending behavior of the different sectors of the economy?
How do behavior changes in these sectors influence the level of output and
income in the overall economy? Can policy makers (“FED”, Congress) maintain
stable prices, full employment and sustainable, adequate economic growth over
are the various measures of labor unemployment
and underutilization (U1 – U6). Explain the various observed
employment / unemployment trends on demographic groups, unemployment rate and
labor force participation. If you were an advisor to the POTUS (President of
US), what recommendations would you suggest to improve the employment picture
for all demographic groups, labor force participation and GDP?
is money? How
do we define money in our monetary system?
What are the functions of money?
What is meant by fiat money versus
it’s intrinsic value? Why is the study of money flows from person to person
important? How does the concept of liquidity play a role in our monetary
structure? What are the FED’s various tools in conducting monetary policy? What ultimately determines
capital flows throughout the world?
Why is financial capital important in economic growth? What is more
mobile, labor or capital? In your analysis explain the difference between nominal
versus real rates of return?
10. Required: Explain the market (supply and demand) for loanable
funds and the role interest rate plays. Provide examples of tax policy changes
which increase incentives augmenting savings and investment. Provide commentary
and graphical analysis documenting interest rate / loanable fund changes. Refer to Gross Private Domestic Investment
Expenditure and Investment Spending Function
your analysis to include government budget deficits and surpluses to the supply
/ demand of loanable funds and describe the “Crowding Out” effect on private
investment spending on GDP?
is meant by National Savings? Private
Savings? Public Savings? Budget Surplus and Deficit? How do these impact
GDP when determining monetary and fiscal policy strategies in tandem?
is a Production Function? Describe
the components of this functional relationship. Highlight the different scale /rates
of economic growth discussed. What is meant by “Production Technology and
Input Substitution”; “Production and Cost Analysis in the
Long Run”, “Isoquant
rate of savings, population / demographics, education and research /
development – technological knowledge further influence the GDP of society?
is meant by the GDP / aggregate expenditure (“AE”)? What are the components of
“AE” and how does it measure total expenditure and income of a society. What
is the difference between nominal versus
real GDP when assessing growth? Why
is this metric important in measuring? ***See attached graph***
14. Why is
it important in measuring price changes in our economy? Compare and contrast the
GDP deflator to PCE, CPI / PPI?
real versus nominal Interest rates
and their impact on capital flows, investment, savings & spending? As a manager, why should you be cognizant of
trends in interest rates?
16. What is meant by monetary, fiscal and trade policy
and how can it influence market demand and market supply? What are the long run implications of an
expansionary monetary and fiscal policies on the economy if left unchecked?
and contrast behaviors, which led to the Great
Depression (1930’s) and the current Pandemic (COVID) worldwide recession? What was similar and what was different?
What did the Federal government and Federal Reserve do in the 1930’s which
prolonged the duration of the Great Depression.
Alternatively, what is the U.S. Federal government and the Federal
Reserve Bank doing today to which mitigate the effects of the pandemic? Apply also general economic research.
>Associated with #18, what can we learn from
studying economic history?
great 18th- century Classical economist Adam Smith wrote, “Little
else is requisite to carry a state to the highest degree of opulence from the
lowest barbarism but peace, easy taxes and a tolerable administration of
justice: all the rest being brought about by the natural course of things”.
>Explain how each of the conditions Smith describes would promote
economic growth for all. In your answer, reference the
salient “Principles of Economics” in driving sustainable economic growth
and prosperity. ***See attached 15 Econ Principles***
20. As of
a summary of the current and future state of the U.S. and world wide economy,
including fiscal, monetary & trade policy? How has the post- pandemic
impacted economic growth, commerce, markets and confidence? Discuss the post effects as it relates to
impacts associated with aggregate demand & aggregate supply?
the Aggregate Macro Model as it relates to Aggregate Demand &
Aggregate Supply? Why as a manager should be aware of these models and their
respective determinants? ***See attached graph***
22. Required: What are various leading, coincident and lagging
economic indicators which Managers should be aware of when assessing micro and
macro trends and their impacts to their business, firm and overall industry? ***See attached graph***
Do 10 questions. Note: Required questions are # 1, 4, 6, 10 & 22. Each answer s
Do 10 questions.