Assignment

QUESTION SET A

Question A 1.

Mishkin and Rogoff both have ideas about the costs and benefits of financial globalization. Furthermore, you may be able to make some inferences about what Kling would think of financial globalization. Given that, consider the following questions:

• Why, according to the authors, might an international institution succeed when domestic institutions cannot.
• What would an international institution do in a crisis?
• What benefits would an international institution provide to the global financial community?
• What are the disadvantages of creating a strong international financial institution to help with financial crises?

To get an A on this question, you must try to interject what you THINK Kling would say about these topics on an international level, even though his essay (Not What They Had in Mind) focused on the US.

Question A2.

Listen to the given audio:

Munger discussed the nature of the firm, while Kling discussed the nature of progress. First, carefully discuss Munger's view on why firms exist. Then discuss Kling's view on progress.

Then discuss how these two fit together. How, in other words, have firms been able to keep up with progress? (In other words, how has managing a firm (especially it personnel) changed in the last 100 years.)

Question A3.

Listen to the given audio:

Consider the podcasts about the Oregon Medicaid experiment. What are the weaknesses of empirical research in social sciences? Now, reaching a bit beyond the topic of the podcasts, why is applied research so risky for society when applied to government programs but not so risky when used by private businesses? (This is a tough question, but I don't think it is a rhetorical one: there is an (are) answer(s).

QUESTION SET B Answer 2 of three questions.

Question B1.

Both Lucas and Taylor believe that monetary stimulus can influence the real economy in the short run. However, they explain the way that money achieves this in very different ways. What is similar and different about Lucas and Taylor's transmission mechanism?

Question B2.

What, in your opinion, do you think Kling's main point was in his essay "Not What They Had in Mind?"

What evidence does he present that supports his main point?

Kling's most basic policy suggestion is that we should have policies that support more equity finance as opposed to more debt finance. Why does he think that? What policies can you envision that would support that policy goal.

Question B3.

Mishkin gives a good explanation of what banks do. So, what do banks do? (Bank=financial system.) What happens when banks can't do what they do? In your answer, be sure to discuss asymmetric information.

Here is a bit of help for the final.

First, question B3 can be answered using the following:

Question A1 starts with a straight forward inventory of what either Mishkin or Rogoff might think of the formation of an international institution (almost a "central bank for the world") Try to guess what Kling would think. (Hint: I have no idea what Kling would think myself, so don't worry about getting it "right." Incorporate some of Kling's ideas into your answer.)

Read Arnold Kling's history of the policies that created the great recession

Read John Taylor's article about monetary transmission mechanisms.

Read Lucas' Noble lecture on monetary neutrality.

1. What are Hume's two principles about modern monetary theory?
2. Why should economists use general equilibrium rational expectations models to explain what Hume described?
3. Does the data agree with Hume?
4. According to Lucas, why does an increase in monetary growth stimulate the economy?
5. Is Lucas' idea much different than others you've studied in macro courses?

Read Mishkin's article about global financial instability.

Read Rogoff's article about global financial instability.

Attachment:- Readings.rar