Hello, So this assignment is split up into 3 parts, please only take this assignment if you are willing to do a good job, and have knowledge of Econ.
So this assignment has 3 parts:
Assignment 5 – 13 Questions
Assignment 6 – 17 Questions
Discussion Question Number 5 and 6 (Together)
Instructions:
For the 2 assignments, please completely answer all aspects of the question correctly,
For the Discussion Questions please answer that question in COMPLETE DEPTH, THROUGHLY, AND IN 2-3 PARAGRAPHS.
Assignment 5:
1. (Short-Run Aggregate Supply) In the short run, prices may rise faster than costs. Suppose that labor and management agree to adjust wages continuously for any changes in the price level. How would such adjustments affect the slope of the aggregate supply curve?
2. (Potential Output) Define the economyâ€s potential output. What factors help determine potential output?
3. (Actual Price Level Higher Than Expected)Discuss some instances in your life when your actual production for short periods exceeded what you considered your potential production. Why does this occur only for brief periods?
4. (Expansionary Gap) How does an economy that is experiencing an expansionary gap adjust in the long run?
5. (Changes in Aggregate Supply) What are supply shocks? Distinguish between beneficial and adverse supply shocks. Do such shocks affect the short-run supply curve, the long-run supply curve, or both? What is the resulting impact on potential GDP?
Chapter 12 questions:
6. (The Federal Budget Process) The federal budget passed by Congress and signed by the president shows the relationship between budgeted expenditures and projected revenues. Why does the budget require a forecast of the economy? Under what circumstances would actual government spending and tax revenue fail to match the budget as approved?
7. (Budget Philosophies) Explain the differences among an annually balanced budget, a cyclically balanced budget, and functional finance. How does each affect economic fluctuations?
8. (Crowding Out) Is it possible for U.S. federal budget deficits to crowd out investment spending in other countries? How could German or British investment be hurt by large U.S. budget deficits?
9. Try your hand at balancing the federal budget by using Nathan Newmanâ€s National Budget Simulation (created at UC Berkeley) at http://www.nathannewman.org/nbs/ (Links to an external site.)Links to an external site.. Questions:
a. Develop a budget and see what happens. Were you successful in balancing the budget? If not, how much of a deficit or surplus did you end up with? What does this exercise tell you about the process of creating a balanced budget?
b. Reexamine the budget cuts or increases you made. What problems would such changes pose for a politician facing reelection?
10. Please go to the Web site for the Bureau of the Public Debt at http://www.treasurydirect.gov/govt/govt.htm (Links to an external site.)Links to an external site. The site contains information on the current public debt of the United States, holders of the debt, and historical information. What is the current value of the national debt? How has this changed over the past year?
11. (Budget Philosophies) The functional finance approach to budget deficits would set the federal budget to promote an economy operating at potential output. What problems would you expect if the country were to employ this kind of budgetary philosophy?
12. (The Miraculous Budget Surplus) Why did the federal budget go from a huge deficit in 1992 to a surplus in 1998? Explain the factors that contributed to the turnaround.
13. (The Twin Deficits) How is the U.S. budget deficit related to the foreign trade deficit? What are the potential negative effects of higher national debt on the economy?
Assignment 6:
1. (Fiat Money) Most economists believe that the better fiat money serves as a store of value, the more acceptable it is. What does this statement mean? How could people lose faith in money?
2. (The Value of Money) When the value of money was based on its gold content, new discoveries of gold were frequently followed by periods of inflation. Explain.
3. (Depository Institutions) What is a depository institution, and what types of depository institutions are found in the United States? How do they act as intermediaries between savers and borrowers? Why do they play this role?
4. (Federal Reserve System) What are the main powers and responsibilities of the Federal Reserve System?
5. (Bank Deregulation) Some economists argue that deregulating the interest rates that could be paid on deposits combined with deposit insurance led to the insolvency of many depository institutions. On what basis do they make such an argument?
6. (Functions of Money) What are the three important functions of money? Define each of them.
7. (Commodity Money) Early in U.S. history, tobacco was used as money. If you were a tobacco farmer and had two loads of tobacco that were of different qualities, which would you supply as money and which would you supply for smoking? Under what conditions would you use both types of tobacco for money?
8. (Monetary Aggregates) Calculate M1 and M2 using the following information:
Large-denomination time deposits $ 304 billion
Currency and coin held by nonbanking public 438 billion
Checkable deposits 509 billion
Small-denomination time deposits 198 billion
Travelerâ€s checks 18 billion
Savings deposits 326 billion
Money market mutual fund accounts 637 billion
9. (Reserve Accounts) Suppose that a bankâ€s customer deposits $4,000 in her checking account. The required reserve ratio is 0.25. What are the required reserves on this new deposit? What is the largest loan that the bank can make on the basis of the new deposit? If the bank chooses to hold reserves of $3,000 on the new deposit, what are the excess reserves on the deposit?
10. (Money Multiplier) Suppose that the Federal Reserve lowers the required reserve ratio from 0.10 to 0.05. How does this affect the simple money multiplier, assuming that excess reserves are held to zero and there are no currency leakages? What are the money multipliers for required reserve ratios of 0.15 and 0.20?
11. (Money Creation) Show how each of the following would initially affect a bankâ€s assets and liabilities.
a. Someone makes a $10,000 deposit into a checking account.
b. A bank makes a loan of $1,000 by establishing a checking account for $1,000.
c. The loan described in part (b) is spent.
d. A bank must write off a loan because the borrower defaults.
12. (Money Creation) Show how each of the following initially affects bank assets, liabilities, and reserves. Do not include the results of bank behavior resulting from the Fedâ€s actions. Assume a required reserve ratio of 0.05.
a. The Fed purchases $10 million worth of U.S. government bonds from a bank.
b. The Fed loans $5 million to a bank.
c. The Fed raises the required reserve ratio to 0.10.
13. (Monetary Control) Suppose the money supply is currently $500 billion and the Fed wishes to increase it by $100 billion.
a. Given a required reserve ratio of 0.25, what should it do?b. If it decided to change the money supply by changing the required reserve ratio, what change should it make?
14. (Money Aggregates) What portion of U.S. Federal Reserve notes circulate outside the United States? How does this affect the United States?
15. (Creating Money) Often it is claimed that banks create money by making loans. How can commercial banks create money? Is the government the only institution that can legally create money?
16. (Monetary Policy and an Expansionary Gap) Suppose the Fed wishes to use monetary policy to close an expansionary gap. Should the Fed increase or decrease the money supply? If the Fed uses open-market operations, should it buy or sell government securities?
17. (Money Supply Versus Interest Rate Targets) Assume that the economyâ€s real GDP is growing. What will happen to money demand over time? If the Fed leaves the money supply unchanged, what will happen to the interest rate over time? If the Fed changes the money supply to match the change in money demand, what will happen to the interest rate over time?
Discussion Question: PLEASE MAKE SURE TO ANSWER IN DEPTH , AT LEAST 2 PARAGRAPHS IN NORMAL TEXT FORMAT
Finding ways to improve humanity’s living standards is the point of economics. Having a good measure of living standards, you may think, is therefore pretty fundamental to the discipline. For decades economists have turned to gross domestic product (GDP) when they want an estimate of how well off people are. By how much are Americans better off than Indians, or than their parents’ generation? Chances are the answer will start with GDP.
GDP is really a measure of an economy’s output, valued at market prices (to the extent that you have them). As societies produce more, and therefore earn more, their material well-being rises. So it is no surprise that so many economists and official statisticians broadly accept GDP as a measure of living standards.
Do you think GDP is the best measure of living standard? Why? Why not?
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