Homework 2
Due Monday, November 2
(1) The first estimate of the change in GDP during the third quarter of 2009 will be released by the Bureau of Economic Analysis www.bea.gov on Thursday, October 29. According to this estimate, what is the change in GDP? If a recession is over when GDP starts to increase, are we out of the recession? If you can, also find the numbers on the change in C, I, G, X, and IM.
(2) What is fiscal policy?
(3) What are the two major fiscal policies that can be used to try to get the economy out of a recession?
(4) What is a budget deficit?
(5) What are some major reasons why the large budget surplus of 2000 has switched into a large budget deficit today?
(6) What is one good thing about a budget deficit? What is one bad thing?
(7) What is monetary policy?
(8) What are four things the Federal Reserve can do with monetary policy to try to get us out of a recession?
(9) How would your answers to questions 3 and 8 change if we were trying to reduce the inflation rate (by reducing demand) rather than trying to get out of a recession (by increasing demand)?