Country Alpha and Country Beta both start with GDP per capita of $5,000. Alpha grows at 2% per year; Beta grows at 5% per year. Approximately how many years will it take for Beta’s GDP per capita to be AT LEAST DOUBLE Alpha’s?

A student proposes: (1) Lower the reserve ratio from 15% to 5%; (2) Print money to fund government infrastructure (roads); (3) Subsidize university education. Evaluate each component’s effect on LONG-RUN price level and LONG-RUN real GDP per capita.

In 2021, the Fed expanded M2 by approximately 26%. Real GDP grew approximately 5.7%. Using pi = % change M – % change Y and assuming stable velocity, what inflation rate does the theory predict, and how does this compare to actual CPI inflation of 4.7% in 2021?

Which of the following policies could shift the LRAS rightward AND simultaneously shift the SRAS rightward?

Why did the Greenspan era (1987-2006) produce simultaneously low inflation AND low unemployment — seemingly violating the Phillips Curve trade-off?

An economy with MPC = 0.8 is in recession with output $600 billion below Y_N. The Fed has room to cut rates. Which statement about using BOTH fiscal and monetary policy together is MOST accurate?

The rational expectations school argues that a CREDIBLE disinflation announcement could shift pi^e downward immediately, reducing the sacrifice ratio. Paul Volcker’s 1979-1983 disinflation was considered credible, yet unemployment still rose to 9.7%. Which explanation BEST reconciles these facts?

The sacrifice ratio is estimated at 5. The central bank wants to reduce inflation from 11% to 3% (an 8 pp reduction) and considers Strategy 1 (complete in 2 years) vs. Strategy 2 (complete in 8 years). Calculate the annual GDP loss under each strategy.

Forward guidance is an unconventional monetary policy tool at the ZLB. Why does a central bank announcement about FUTURE interest rates affect CURRENT spending decisions?

In 2021-2022, the U.S. experienced 9.1% inflation with 3.5% unemployment. By early 2024, inflation had fallen toward 3% while unemployment remained near 3.7%. This fell short of the large sacrifice ratio many economists expected. Using the PC framework, which explanation BEST accounts for this outcome?