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ECON1101 Macroeconomics

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Question:

1.A. What happens to the money supply if the Federal Reserve Bank reduces interest rates at their next meeting? Make sure to include the appropriate equation. Make sure to include a money graph.

B. How would this change in interest rates alter C, I, and AD? What would then happen to output (GDP) and inflation? Make sure to graph the goods (AD/AS) graph. What type of impact do you think this will have on unemployment and future prices?

2. How do we fight inflation using Monetary Policy (Make sure to include the 4 tools of monetary policy and how we should use them.) and Fiscal Policy (Make sure to include all appropriate graphs and equations):

A) Under the Classical model
B) Under the Keynesian Model
C) Under the Supply Side model

3. A. How will a cut in income taxes of $400 billion with a MPC equal to .80 impact AD, inflation, and output? Why? Make sure to include the appropriate equations and graph.

B. How does the cut in taxes impact the budget deficit and the national debt?
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