Macro and International Economics

Study Questions

SES #	TOPICS	STUDY GUIDE QUESTIONS
1	The issues, short–term and long–term	How do we measure economic growth? Does this make sense? What is successful performance in the short–term for the United States? What would you regard as an acceptable growth rate for Western Europe or for an “emerging market” (such as Brazil, China, India, or Russia)? Where are we in the global economic cycle?
2	Determinants of long–term growth	When did countries diverge in income per capita? Which alternative explanations could account for this divergence? How important are savings and investment for growth? What is the role of productivity? How should we think about short–run macro dynamics relative to long–run growth and—for some countries—the failure to sustain growth?
3	Exchange rates for emerging markets	How do macroeconomic dynamics differ for countries that are open to trade? If countries are also open to capital flows, what difference does that make? Should China revalue its currency? Why exactly?
4	Exchange rates for industrialized countries	Is the US current account deficit a “problem”? In what sense? How could the US current account deficit be made smaller? What is your recommendation to US policymakers with regard to the current account deficit?
5	Banking crises	What caused the banking crisis of the 1930s? Could that happen again today? Can expansionary fiscal policy offset the effects of a banking crisis? What is missing from the ISLM model?
6	Modern financial crises	To what extent were “global imbalances” responsible for the crisis of 2008–09? Could “easy” monetary and fiscal policy have played a role in creating the conditions for a crisis? What was the likely role of weak financial regulation?
7	Japan’s lost decade	What was good about the Japanese financial system prior to 1990? What went wrong in Japanese finance after 1990? Why wasn’t macroeconomic policy able to get Japanese growth going again?
8	Crisis in Asia, 1997–98	What caused the financial crisis in Korea? What kinds of reforms did Korea need? What did the IMF propose and why?
9	Who is more prone to crisis now—Europe or the US?	Are modern economies becoming more or less prone to crises over time? Why? What would you recommend to make Europe “safer” in macroeconomic terms? What needs to be done, with regard to macroeconomic policy, in the United States?