CALIFORNIA STATE UNIVERSITY, SACRAMENTO
Department of Economics
Prof. A. R. Gutowsky
Economics 100A
Problem Set 3
Chapter 6
This is a chapter with a lot of information in it, so read it by concentrate on the
following:
1. Understand the equation (U/L) = s/s + f.
(A) What is the natural rate of unemployment?
2. What is "frictional unemployment?"
3. What factors explain the rigidity of real wages?
4. What is the efficiency wage?
Chapter 7
This is another chapter with a lot of information, so concentrate on the following:
1. What is the quantity theory of money?
(A) Know the meaning of all the equations on
pages 161-164.
2. What is the fisher effect?
3. Know the meaning of all the equations on pages 171-173.
(A) pay particular attention to page 174,
4. What are the social cost of inflation?
5. What is the classical dichotomy?
Chapter 8
1. What is an open economy?
2. Know the meaning of the equations on pages 195-198.
(A) In terms of these equations, what is the
economic meaning associated with the United States having
a negative
trade balance?
(B) What is the current size of the U.S. trade
balance? Website assignment.
3. What is meant by capital mobility?
4. Pages 198-205 deals with a small open economy and capital mobility.
(A) Can this country maintain fixed exchange
rates, capital mobility and monetary policy autonomy?
This is
a key question. You should know the answer.
(B) Know the equations on pages 198-199.
(C) Know the economic meaning of Figure 8-2 on
page 200.
(D) How will domestic fiscal policy influence
the trade balance?
(E) How will fiscal policy abroad influence the
trade balance?
(F) How will changes in domestic investment
influence the trade balance?
5. What is the exchange rate?
(A) What is the difference between a nominal
and a real exchange rate?
(B) How will changes in the real exchange rate
influence the trade balance?
(C) What is the determinant of the real
exchange rate? See Figure 8-8 on page 209.
6. Explain how economic policies can influence the exchange rate?
7. Define the term: trade policy.
8. What are the determinants of the nominal exchange rate?
(A) Know the equations on page 214.
9. What is purchasing power parity?
(A) Know the material found on pages 218-220.
10. Repeat question (4) for a large open economy.
(A) read pages 224-232.
[Problem Set 1 2 3 4 5] [Exercises] [Reading Assignments] [Web Resources]