PLEASE ANSWER ALL QUESTIONS:
Question #1 (worth 4%)
In June 2019, individuals and businesses held
$58 billion in currency and no traveler’s checks
$1,375 billion in checkable deposits
$9,000 billion in savings deposits
$250 billion in time deposits
$650 billion in money market funds and other deposits
In June 2019, banks held
$850 billion in currency
$875 billion in reserves at the central bank
$950 billion in loans to households and businesses
Using the information mentioned above, answer the following questions.
Calculate the M1 and M2 measures of money.
Calculate the monetary based.
What are the currency drain ratio and the banks’ reserve ratio?
What are the M1 and M2 money multipliers?
How is the money multiplier influenced by the banks’ reserve ration?
Question #2 (worth 4%)
Explain for each event whether it changes the quantity of real GDP supplied, short-run aggregate supply, long-run aggregate supply, or a combination of them.
Toyota and Honda build additional plants in the United States
Autoworkers agree to a higher money wage rate.
Explain for each event whether it changes the quantity of real GDP demanded or aggregate demand in the United States.
U.S. exports to the European Union boom.
U.S. inflation rate is expected to rise next year.
Question #3 (worth 4%)
Suppose that the business cycle in the United States is best described by RBC theory and that new technology increases productivity.
Draw a graph to show the effect of the new technology in the market for loanable funds.
Draw a graph to show the effect of the new technology in the labor market.
Explain the when-to-work decision when technology advances.
Question #4 (worth 4%)
The economy is in a boom, and the inflationary gap is large.
Describe the discretionary and automatic fiscal policy actions that occur.
Describe a discretionary fiscal restraint package that could be used that would not produce serious negative supply-side effects.
Explain the risks of discretionary fiscal policy in this situation.
Question #5 (worth 4%)
The Fed’s mandate policy goals are “maximum employment, stable prices, and moderate long-term interest rates.”
Explain the harmony among these goals in the long run.
Explain the conflict among these goals in the short run.
Based on the performance of U.S. inflation and unemployment, which of the Fed’s goals appears to have taken priority since 2000?
