1. Calculate the GDP loss if the actual GDP produced in 2018 was $ 8200b with the unemployment rate of 7.8%. Assume MPC = .75. Calculate the amount of government expenditure and tax cut needed to maintain full employment.

2. Suppose the fed were to sell off $500 worth of used office furniture to private citizens. Explain why the money supply and bank reserves would decrease.

3. Who determines money supply and how does the money supply curve look like?

4. Why banking system is said to be on fractional reserve. Please explain.

5. Define Quantity Theory of Money. Why velocity must be stable or predictable for the Quantity Theory of Money to yield useful predictions?

Bank of Your Class

Balance Sheet

Assets	Liabilities
Cash $4,000 Deposited with the fed $4,000 Loans $192,000	Total Deposits $120,000 Capital $80,000
Total $200,000	$200,000

6. Calculate the following if the RRR is 6%

Actual Reserve (AR)of the Bank of Your Class

Required Reserve (RR) of the Bank of Your Class

Excess Reserve (ER) of the Bank of Your Class

How much new loans (NL) the Bank of Your Class can create because of this Excess Reserve (ER)?

How much new loans (NL) the entire banking system can crate because of this Excess Reserve?

7. Calculate the following if the RRR is changed to 5%

Actual Resave (AR) of the Bank of Your Class

Required Reserve RR) of the Bank of Your Class

How much new loans (NL) the Bank of Your Class can create?

What happened to money supply after the Fed reduced the RRR from 6% to 5%?

8. Describe the discount rate, the federal funds rate, and the prime rate.