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5. Consider a supply and demand diagram for money like the one we studied in class, with the quantity of money on the horizontal (x) axis and the "goods price of money" on the vertical (y) axis. a. Suppose first that real GDP rises and that, as a result, the consumers who and firms that are buying more goods and services want to hold more money at any given level of prices. In the diagram, will this shift the demand curve for money to the left or to the right?

b. As a result of this shift in the money demand curve, what will happen to the economywide level of prices - that is, to the "dollar price of goods" - will it rise, fall, or stay the same?

[2:43 AM, 10/24/2021] Fridah: 1. An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes. a. Construct a table with data about both producers b. Graph the production possibilities frontier of Brazil and Peru. c. Who has the absolute advantage in coffee? Explain. d. Who has the comparative advantage in coffee? Explain. e. If the two countries specialize and trade with each other, who will import coffee and who will import soybeans . Explain. [3:24 PM, 10/24/2021] Fridah: A country is currently in a recession.

a. Illustrate this economy on a fully-labeled aggregate demand-aggregate supply model. Include aggregate demand, short-run aggregate supply, and long-run aggregate supply. I. Label the short-run equilibrium price level PLE and the short-run equilibrium output YE. II. Label the full-employment level of output YF. b. If the government and central bank do not intervene, how would this economy adjust in the long run? Explain.

c. Illustrate the process of part (b) on your graph from part (a). d. The government decides to use fiscal policy to correct the economic situation in part (a). Assume the difference between the short-run and long-run equilibrium output is worth $36 billion, and the marginal propensity to consume is 0.75. Calculate one specific and effective fiscal policy action the government could take. e. What would be the short-run impact of the government's action on the economy's real output? f. What would be the short-run impact of the government's action on the potential output of the economy? g. Will the long-run equilibrium price level if the government intervenes be less than, equal to, or greater than the long-run equilibrium price level without intervention? h. Show the impact of the government intervention from part (d) on the equilibrium real interest rate on a fully labeled loanable funds market graph. i. Will the long-run aggregate supply curve move as a result of the change from part (h)? Explain. [7:27 PM, 10/24/2021] Fridah: The custom T-shirt printing business has many competitors, so that the perfect competition model may be considered a good approximation. Currently, the market demand curve is given by Q = 120 1.5 p, whereas the market supply is given by

Q = 20 + 2 p.

(a) Determine the market equilibrium Suppose there is a T-shirt craze that increases demand by 10% (that is, for each price, demand is now 10% greater than it was before the craze).

(b) Determine the new demand curve.

(c) Determine the change in equilibrium quantity.

(d) If your answer to the previous question is different from 10%, explain the difference in values. Now go back to the initial demand curve and suppose there is an increase in the cost of blank T-shirts, an essential input into the business of selling custom T-shirts. Specifically, for each unit by each supplier, the production cost goes up by 10%.

(e) Determine the new supply curve.

(f) Determine the change in equilibrium price.

(g) If your answer to the previous question is different from 10%, explain the difference in values.