1.An economy is using coal-fired power stations. New technology makes renewable

energy sources much more cost effective. The government simultaneously introduces

regulations favoring the use of this new technology. Firms are interested in switching to

the new technology, and banks anticipate that firms will increase their demand for loans.

The CEO of Tepperland Financial Group sees this as a potential business opportunity, but

bank's analysts say that the reserves on the bank's balance sheets only meet the required

reserve ratio. Is this a problem for the CEO? If you think it is, describe a possible solution.

If you think it is not, explain why.

2.An economy is the switch from coal to renewable energy sources has lead to a period of economic expansion, which causes GDP to increase. You work for the government as an analyst, and you are asked to provide advice to a senior government official about the impact of this scenario on prices. In particular, you are asked to discuss:

- What would happen if the government were to take no action?

- What can the government do to avoid any change in prices?

Provide diagram(s) to support your answer