Problem 1: Define money and list the functions it performs.
Problem 2: Assume the government cuts its purchases by $120 billion. As a result, the budget deficit is reduced by $40 billion, private domestic saving decreases by $10 billion, disposable personal income decreases by $80 billion and the trade deficit is reduced by $15 billion. By how much has national income (Y) changed?
Problem 3: Using the information in the following table:
Component Number of People (millions)
Total Population 300
Working-age population 258
Employed 145
Unemployed 10
to calculate the:
(a) Unemployment rate and
(b) the Labor Force Participation rate
Q4. If C = 0.05; rr = 0.1 and e = 0.05 What is the Money Multiplier?
Where C = currency ration; rr = reserve requirement and e = excess reserve ratio.
Q5. Discuss the tools used by the Federal Reserve System in its monetary policy to regulate the economy.