Question One:
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Suppose the working-age population is 150 million, the labor force is 125 million, and employment is 120 million.
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a.    What is the unemployment rate?
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b.               Now suppose that 2 million students graduate from college and begin to look for jobs. What is the new unemployment rate if none of the students have found jobs yet?
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c.     Suppose that all 2 million students find jobs. What is the unemployment rate now?
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Question Two
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The First Bank of Fairfield
Assets
Liabilities
Reserves
$2,000
Deposits
$10,000
Loans
8,000
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A: What is the reserve ratio for this bank ?
B: If $1,000 is deposited into the First Bank of Fairfield, and the bank takes no other actions. How much will be the assets?
C: If someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, what will be the amount of new loan?
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Question
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The Federal Reserve (FED) expands the money supply by 5 percent.
a.    Use the theory of liquidity preference to illustrate in a graph the impact of this policy on the interest rate.
b.   Use the model of aggregate demand and aggregate supply to illustrate the impact of this change in interest rate on output and the price level in the short run
c.     When the economy makes the transition from its short-run equilibrium to its long-run equilibrium, what will happen to the price level?
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How will this change in the price level affect the demand for money and the equilibrium interest rate?
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Posted 03 May 2017 08:05 AM
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