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ECON2171-WE01

MACROECONOMICS FOR FINANCE

2020

1. ‘According to the Solow model, the incomes per capita of nations will eventually converge, but this does not always appear to be the case, thus there must be some error with this model’ Discuss.

2. Explain the effect of the exchange rate regime in use on the effectiveness of national monetary and fiscal policy in an open economy.   

3. Examine the relationship between the NAIRU, inflationary expectations, and the Phillips curve.  In the light of the discussion in Mankiw (2001), does the New Keynesian Phillips curve appear an improvement over the previous model?

4. ‘Clearly, there are significant limitations on the ability of governments to borrow, as the consequences of excessive government debt are economically undesirable.’  Discuss this statement, and assess the policy options that are available if the level of government debt is thought to be too high.

5. Explain the determinants of aggregate supply in both the short and long run.  How did Lucas (1977) explain the characteristics of aggregate supply?

6. Critically assess the theoretical basis of the Real Business Cycle Theory and its credibility as an explanation of observed business cycles.

7. Student centred learning question.

Explain whether it would be possible for business cycles to be either opportunistic, as per Nordhaus (1975), or partisan as in Hibbs (1977) in the light of rational expectations.