In the days when Italy had its own currency, the lira, how would a switch toward smaller deficits and faster growth of the money stock have affected interest rates, aggregate demand, investment and GDP?
In the US, the Fed sets monetary policy for the whole country, but each state has a substantial role in determining taxes and government spending. In what ways do you think the situation of individual state that grows slower than the US national average is similar to that of Italy with the EU? In what ways does it differ?
Some economists think a uniform deficit limit of 3% of GDP for all Euro Zone countries is unrealistic. They say the limit should be higher for countries going through recession. Explain how an alternative \"full employment deficit limit\" might be defined and implemented.
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