1. Given your model of aggregate demand when there are three ?nancial assets, money, bonds and credit, and the standard classical production function, would disturbances in the loan market cause changes in output and employment? Your answer should present the determination of output and employment in this model.
2. Given your model of aggregate demand when there are three ?nancial assets, money, bonds and credit, show how the new Keynesian model allows shifts in the credit market to alter output and employment.
3. What is working capital? Justify its inclusion in a production function and show the impact of a decrease in working capital on the supply of short-run output and employment.