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1- GDP has long been criticized by politicians and some economists as an obsolete and misleading method of measuring well-being. Some, such as former French

1- GDP has long been criticized by politicians and some economists as an obsolete and misleading method of measuring well-being. Some, such as former French President Nicolas Sarkozy, have called on countries to adopt a new standard. Comment on Mr. Sarkozy's observation.

2- The national debt of many developed nations is projected to grow to unsustainable levels. Why might national legislatures welcome higher inflation? Does inflation offer a means for a country to finance its increasing debt?

3-What is the money supply and why do nations regularly take its measure?

4- Explain why a central bank exercises more control over the monetary base than the M2 money supply.

5- A nation is experiencing a recession with declining GDP, expectations for negative or low growth and poor profitability, decreasing personal income, and rising unemployment (contractionary business cycle). Using the supply and demand for loanable funds model, explain why the central bank may aggressively expand the monetary base.

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