Economics worksheet

.

Economics 211

1.Examine whether the following items are built-in stabilizers or discretionary changes.

(a)  Unemployment benefits

(b)  Tax cuts

(c)   An increase in government spending on road work

(d)  Progressive tax system

 

2. What fiscal policy is most likely to be invoked during a period of recession and high unemployment?  A period of rapid inflation?

3. Use the figures in the table below to answer the following questions.

  Billions
Small time deposits

Money-market mutual funds held by businesses

Savings deposits, including money-market deposit accounts

Money-market mutual funds held by individuals

Checkable deposits

Currency

$1250

 

1300

 

1620

 

905

836

325

 

(a)  What is the value of M1?

(b)  What is the value of M2?

4.  Answer the next questions based on the following consolidated balance sheet for the commercial banking system.  Assume the required reserve ratio is 25%.  All figures are in billions of dollars.

Assets Liabilities + Net Worth
Reserves                  $100

Securities                   200

Loans                         100

Property                     600

Checkable deposits          $300

Stock shares                        700

 

(a)  What is the amount of excess reserves in this commercial banking system?

(b)  What is the maximum amount that the money supply can be expanded?

(c)   If the reserve ratio fell to 20%, what is now the maximum amount that the money supply can be expanded?

 

5.Describe how changes in the Fed’s major policy tool leads to expansionary and restrictive monetary policies.

 




Order This Paper Now