Problem Set 8

Problem Set 8 (PS8)

Principles of Macroeconomics (Eco 200-800)	SUNY-Oswego
Solutions will be posted or distributed by Fri., April 21, 2000	Ranjit Dighe

I. SERGEANTS, BOOK HER AND TAKE HER AWAY

A. Case & Fair (5^th edition), Chapter 9: #1, 4, 6, 7

B. Case & Fair, Chapter 10: #2, 4, 6, 8
-- For the last two questions of Chapter 10, #6, you might try looking at Table B-79 of the online version of the 1999 Economic Report of the President, at

http://www.gpo.ucop.edu/catalog/erp99_appen_b.html ---- You can also access it through the course web page.
---- The column you want is the one that says "Held by public" at the top.

II. THE JOY OF SPENDING

1.
a. What is the balanced-budget multiplier?
b. Explain what a former student of mine probably meant when he said the balanced-budget multiplier should be re-named the "tax and spend" multiplier.

2.
a. What is the paradox of thrift?
b. Relate the paradox of thrift to the idea of trying to reduce a government budget deficit by cutting spending or raising taxes during a recession.