Text Book: Mankiw, N. G. (2012). Principles of Macroeconomics (7th ed.). Mason, OH: Cengage Learning

Answer all of the following questions. This assignment covers text chapters 13 through 17.

1. What is the role of the financial system? Name and describe two markets that are part of the financial system in the U.S. economy. Name and describe two financial intermediaries.

2. What is the government budget deficit? How does it affect interest rates, investment, and economic growth?

3. What benefit do people get from the market for insurance? What two problems impede the insurance market from working perfectly?

4. Describe the efficient markets hypothesis and give a piece of evidence consistent with this hypothesis. What does this say about using past price histories to predict future prices?

5. What are the three categories into which the Bureau of Labor Statistics divides everyone? How does the BLS compute the labor force, the unemployment rate, and the labor force participation rate?

6. Why is frictional unemployment inevitable? How might the government reduce the amount of frictional unemployment?

7. What claims to advocates of unions make to argue that unions are good for the economy?

8. What factors prevent the Fed from controlling the money supply perfectly? Explain how the Federal Reserve would set policy if it needed to contract the money supply? Be sure to include all three Fed tools in your response.

9. Explain the difference between nominal and real variables and give two examples of each. According to the principle of monetary neutrality, which variables are affected by changes in the quantity of money?

10. What are the costs of inflation? Which of three costs do you think are most important for the U.S. economy?