Question

What are the three functions of money? Which function is the defining characteristic?How is the

discount rate different from the federal funds rate?Consider the balance sheet for the Wahoo bank as presented below.

Wahoo Bank Balance Sheet
Assets	Liabilities
government securities	$1,600	Liabilities:                     Checking accounts	$4,000
Required Reserves	$400	Net Worth	$1,000
Excess Reserves	$0
Loans	$3,000
Total Assets	$5,000	Total Liabilities	$5,000

Using a required reserve ratio of 10% and assuming that the bank keeps no excess reserves, write the changes to the balance sheet for each of the following scenarios:

• Bennett withdraws $200 from his checking account.
• The Fed buys $1,000 in government securities from the bank.

4) Using a required reserve ratio of 10% and assuming that banks keep no excess reserves, which of the following scenarios produces a larger increase in the money supply, explain why.

a) Someone takes $1000 from under his or her mattress and deposits it into a checking account.

b) The Fed purchases $1,000 in government securities from a commercial bank.

5) Using a required reserve ratio of 10% and assuming that banks keep no excess reserves, what is the value of government securities the Fed must purchase if it wants to increase the money supply by $2 million?Why is it possible to change real economic factors in the short run simply by printing and distributing more money?Explain why a stable 5% inflation rate can be preferable to one that averages 4% but varies between 1–7% regularly.

• Explain the difference between active and passive monetary policy.

Suppose the economy is in long-run equilibrium, with real GDP at $16 trillion and the unemployment rate at 5%. Now assume that the central bank unexpectedly decreases the money supply by 6%.

• Illustrate the short run effects on the macro-economy by using the aggregate supply-aggregate demand model. Be sure to indicate the direction of change in Real GDP, the Price Level and the Unemployment Rate. Label all curves and axis for full credit.

Suppose the economy is in long-run equilibrium, with real GDP at $16 trillion and the unemployment rate at 5%. Now assume that the central bank increases the money supply by 6%.

• Illustrate the short-run effects on the macro-economy by using the aggregate supply-aggregate demand model. Be sure to indicate the direction of change in Real GDP, the Price Level, and the Unemployment Rate. Label all curves and axis for full credit.

 

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Question

I really need help with this:Monopolies can sometimes find themselves in difficult financial

situations that lead to losses. Suppose Mr. Burns’ power company has a monopoly for providing electricity in Springfield. His costs of upkeep are so high that he is consistently losing money.

Show this outcome in a completely labeled graph. Clearly identify all parts of your graph, including the best price and output for the firm as well as the losses.

 

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