Opportunities for Discussion

1. What is the difference between the traditional Keynesian and New Keynesian macroeconomic models?

2. How would a New Keynesian economist respond to the monetarist's policy proposal for a steady rate of growth in the money supply?

3. If monetarists believe that money will affect real income in the short run, why don't they support short-run discretionary policies?

4. By assuming that agents in the economy develop rational expectations, are you also assuming that they carry a detailed model of the economy in their heads?

5. According to a new classical economist, would a systematic policy of lying about monetary policy work? For example, the monetary authority announces 5 percent money growth but actually intends to increase the money supply by 10 percent to expand output.