Economics 470/570
Monetary Theory and Policy
Homework 7
1. Use the Phillips curve model to explain the SR and LR effects of expected and unexpected changes in the inflation rate..
2. Does stabilizing the inflation rate stabilize the economy? Explain.
3. What problems are encountered in the pursuit of activist policies?
4. Explain how demand pull inflation can occur.
5. What is the Lucas critique of econometric policy evaluation?
6. What are the arguments for and against rules over discretion?
7. Show that credibility of the Fed helps to stabilize the economy when there are negative AD shocks.
