Answers to Homework #3

Posted to the right and here.

Chinese Stock Market Crashing

The Chinese stock market is plunging. Given our discussion of financial markets, what might account for such a drop in value? (Recall that what matters are profits, the real interest rate, and the growth rate).

Inflation

This article talks about rising consumer prices. If you model this as a shift upward in the SRAS curve, what do you predict will happen to output in the short run and the long run? What will happen to prices long run?

Inequality Slides

Slides from class 4/17 on inequality.

America's Recession

It looks more likely that the U.S. will actually have a recession (that is, the economy may actually shrink in size). This analysis assigns blame to two things a) less lending and b) consumer spending slowing down (MPC falls). Looking just at the loanable funds market, does both of these make sense? (Hint: not really). So the lending slowdown must show up somewhere else - like the money demand function. This would be a great article to use for your final paper.

Problem Set #3 Again

Just a reminder, in case you missed class. Problem set #3 is due on April 10th (not April 3rd as listed on the syllabus).

Problem Set #3

Problem set 3 is now posted in the right-hand column under class materials.