Problem 1: What are the three primary tools that the Federal Reserve use to either expand or contract the money supply? How often is each tool used? What does expanding and contracting the money supply accomplish in relation to credit creation? According to Keynes, what would be an appropriate monetary policy response to an expansionary period in an Economy?
Problem 2: Define and explain three barriers to trade. What effect do these barriers to trade have on domestic consumer surplus? What is the Riccardo Effect in relation to specialization and exchange? Who benefits from specialization and exchange in terms of domestic and international consumers and producers?