Economics assignment

Chapter 9

Q1. Explain why a tax rebate increases output less than increasing government spending by the same amount. Give an example of both for comparison.

Q2. What is the open market operation of the Fed? How do the open market operations work, and what are the effects on the money supply and the economy?

Q3. What is the federal funds rate, and why are changes in the federal funds rate considered more effective than other policy options for achieving monetary objectives?

Q4. Why does the Fed rarely change the existing reserve requirements?

Chapter 8

Use the following macroeconomic model to answer questions Q1 through Q11:

C = 115 + 0.75Yd,

where C = Consumption function; Yd (Y − T) = Disposable income

I = 150; I = Investment

G = 200; G = Government expenditure

T = 100; T = Tax revenue

X = 40; X = Export

M = 30; M = Import

Also assume that Yf = Full employment GDP (potential GDP) = 2,000

Q1. Estimate the equilibrium GDP level (income, Ye).

Q2. Estimate the level of aggregate consumption (C).

Q3. Estimate the level of aggregate saving (S).

Q4. The MPC and MPS for the economy are, respectively, __________ and __________.

Q5. The expenditure multiplier for the economy is __________.

Q6. The tax multiplier for the economy is ____________.

Q7. Given the value of the full-employment level of GDP, the GDP gap is __________.

Q8. The government spending needed to bridge the GDP gap you found in Q7 would be __________.

Q9. If the export value increases to 60 because of a decrease in the value of US$, other things staying the same, then the answer to Q1 would be __________.

Q10. In addition to an increase of export value in Q9, if the import value decreases to 20 for the same reason, other things remaining the same, then the answer to Q1 would be ________

Q11. In Q8, the GDP gap and recessionary gap are, respectively, __________ and __________.

Q12. Illustrate your answers from Q1 through Q8 in a graph of 45-degree equality line, similar to Figure 8.4 in Section 8.3.6.