In the early years of software development the industry had to ...

[futuristic]

In the early years of software development the industry had to train its own workers in developing code to build software applications. It was a very costly undertaking as software firms had to shoulder most of the training costs.
 
  However, over time the industry began to experience decreasing costs. How and why did this transformation take place?

Question 2

Refer to Table 15-4. Suppose the following table illustrates the values of real and potential GDP and the price level if the Fed does not vote to change their current policy to be more contractionary or expansionary.
 
  If the Fed wants to keep real GDP at its potential level in 2017, should the Fed use a contractionary or expansionary policy? How should it conduct open market operations to achieve its goal?

[tuwy]

Answer to Question 1

Over time colleges, universities and technical institutes began to offer computer science course and degrees. Students then began to take on more of the cost of training. This no doubt led to declining cost for the software industry.

Answer to Question 2

The information in the table indicates that if the Fed does not vote to change their current policy to be more contractionary or expansionary, then real GDP will fall below potential GDP in 2017. To keep the economy at potential GDP in 2017, the Fed should use expansionary monetary policy. This would mean that the Fed should direct the trading desk to buy U.S. Treasury bills. If this is done, reserves in the banking system will increase, banks can increase the number of loans, and this should raise the money supply and lower the interest rate.