Questions on Assigned Articles Exam #2

What is the reason for wild fluctuations in the values of cryptocurrencies? (Article 5)

• Cryptocurrencies rely on "proof-of-work" mechanisms, transactions must be continually verified and logged in a decentralized ledger (blockchain). • Trust is inconsistent, so it is fragile and volatile.

What is the Feds schedule to reach that point? (Article 1)

• The Fed will reduce its purchases by $15 billion each month • Their schedule is faster than investors were anticipating because of rising inflation has lasted longer than thought • Dont want to have to raise rates while purchasing assets and expanding the monetary stimulus

What has been the impact of free trade on economic growth? (Article 6)

•Generally lower tariffs, promoted a push for bilateral and regional trade deals. •An explosion of global trade as a share of gross output •Complex global supply chains grew asa part of global trade •The collapse in transportation costs boosted international commerce.

Why is pay rising more in Anglo-Saxon countries and less in continental Europe? (Article 7)

•Places like America and Canada rely more on the consumer-facing industries experiencing the worst labor shortages. •In countries like Italy and France they do not face the same immigration crunch as Britain, Australia and New Zealand that have closed their borders to keep out Covid-19

What is the value of Treasury and mortgage securities that theFed is buying every month? (Article 1)

$120 billion (in monthly purchases of treasury and mortgage securities)

What is the Feds inflation target? (Article 1)

2%

What was the core inflation rate in August? (article 1)

3.6%

What is the average tax rate for the 400 wealthiest households according to economists Emmanuel Saez and Gabriel Zucman? Why? (Article 3)

9.2% When corporate and estate taxes were included, it rose to 23%. Unrealized gains were not included in this analysis.

Why has enormous amount of QE not generated a substantial increase in inflation? (Article 8)

A small proportion of this increased wealth trickles through to the real economy, but must of it simply circulates within the financial system. A large part of the money has fueled assets speculation. Thus creating financial bubbles, while prices and output as a whole have remained stable

Under what conditions rising wages should be concern for the U.S. economy? (Article 7)

An ever-rising labor share would be a worry because it would crimp companies' profits and thus the investments that are cubical to improving long-run economic growth

How does this affect financing of government debt? (Article 2)

Bond investors could see an end coming, and demand even higher interest rates as a risk premium

What is the rise in elation attributed to? (Article 1)

Disrupted supply chains and shortages in labor and materials

Wages are rising. In which sectors wages are rising more and in which sectors rising less? (Article 7)

In the food service sector they are struggling to attract workers, so wages have increased. In manufacturing, wages have not increased that much

Is the decline in labor force participation entirely covid related? (Article 4)

It is related to Covid. Because of covid exposures, facilities had to close and many people were concerned for their own safety.

What are the reasons for Bitcoin's popularity? (Article 5)

Its political narrative, the criminal activities it enables, the seigniorage it distributes, the techno-optimism of the current age, and the desire to get rich quick at a time when few other economic opportunities beckon.

Why has the labor force participation rate declined dramatically especially among women? (Article 4)

Parents were forced to stay home because child-care were closed either temporarily or permanently. Those who stated open, had less staff and half of affected centers are serving fewer children.

Why would QE be viewed as an example of State-created financial instability? (Article 8)

QE generates it own boom-and-bust cycles, so it can generate shock through its own internal dynamics. When the several of set prices produces a crash, the increase in paper wealth vanishes, dragging down the real economy

What can the central bank do to stop inflation? (Article 2)

Raise interest rates sharply, and keep them high for several years, even if it causes a painful recession

Could this lead to a debt crisis? (Article 2)

Raising the debt costs even more, in a spiral that leads to a debt crisis or to a sharp and uncontrollable surge of inflation

When will the Fed stop buying these securities? (Article 1)

Tapering will start in Mid-November and conclude by June

What is the case for free trade? (Article 6)

Tariffs enrich the wealthy at the expense of the poor and that discrimination against foreigners leads to a copycat retaliation making everyone worse off.

Is this transitory or permanent? (Article 1)

The intense and wide-spread supply chain disruptions, will not be brief, so it is not transitory, most likely permanent

Why does successful inflation and currency stabilization require monetary and fiscal reform? (Article 2)

The role of reform is to generate sustainably higher tax revenues by boosting economic growth and broadening the tax base rather than with sharply higher and growth-reducing marginal tax rates

Why is the average tax rate for the 400 wealthiest households is 8.2% according to the White House study? (Article 3)

They include increases in unrealized capital gains. These are important to the wealthiest Americans' net worth. Current income-tax laws don't include this change in the value of assets, including stock, that have not been sold yet. They also exclude corporate and state taxes in the numerator.