Articles 2

Question 1

Who destroys money?

Answer 1

Bureau of Engraving and Printing (BEP) of the U.S. Treasury - cash
Bureau of the Mint - coins

Question 2

How does fed do monetary policy?

Answer 2

buy and sell assets.

Question 3

The Financial Crisis at 10: Will We Ever Recover?

Answer 3

U.S. economy remains significantly smaller than it should be based on its pre-crisis growth trend. Size of productivity losses suggest output will not revert to pre-crisis levels

Question 4

excess bond premium

Answer 4

` a quantitative measure of the risk-bearing capacity of the financial sector.

Question 5

Will the Economic Recovery Die of Old Age?

Answer 5

no because based off of survival analysis statistics, post war expansion mortality rates dont really depend on length
- pre war expansions do though

Question 6

what changes have led to longer expansions?

Answer 6

1 increased share of services instead of tangible goods in the economy’s output; this would tend to diminish the importance of inventory fluctuations and moderate the business cycle
2 large federal government actively focused on stabilizing the economy

Question 7

What is the difference between a recession and a depression?

Answer 7

1 recession = 2 quarters of falling GDP
depression = 3 year recession or rGDP falls 10% +
2 recession caused by period of tight monetary policy
depression caused by burst asset/credit bubble, credit contraction, general price level contraction
3 recession cure = fiscal policy is hard because of lags (tight monetary policy had led to lower interest rates)
depression cure = fiscal policy more effective than monetary (falling asset prices, credit crunch, deflation caused price decrease)

Question 8

why is there low/ negative inflation around the world?

Answer 8

Oil production cuts is most important.

Question 9

why rising employment has not led to inflation in the form of higher pay.

Answer 9

Because bargaining power of workers are down. Unemployment rates in America, Britain and Japan—all of them at or below pre- crisis lows—would previously have triggered rising wages. But all three have seen growth in insecure forms of employment: part-time work has risen, as have the ranks of the “underemployed”, who would like more hours if they could get them

so free the labor market or create minimum wages

Question 10

Stimulative austerity:

Answer 10

cut deficits, and interest rates will fall by enough to produce stronger economic growth.

Question 11

Now

Answer 11

stimulate growth through a bigger deficit, and the long-term debt may shrink.

Question 12

fiscal “multiplier”

Answer 12

the amount by which output rises for each dollar of government spending or tax cuts
close to 0 in normal times

Question 13

when is multiplier higher?

when is stimulus self-sustaining?

Answer 13

investment and demand are depressed

• higher unemployment - unemployment persists for more than 26 weeks (hysteresis)
• depressed economy
• if interest rate is less than 2.5% above economic growth rate

then government can spend and create employment which would bring enough tax revenue to offset the spending.

Question 14

Hysteresis

Answer 14

he tendency of a temporary change in unemployment to become permanent. Eg. surge in demand for women workers during the second world war permanently raised the presence of women in the workforce