1. Imagine that a new $10,000 deposit has been made in the First Bank of Asgard. Explain the money creation process that will occur after this deposit assuming that there is a 10% reserve requirement.

2. Use the quantity equation to explain why stable prices require the money supply to grow at the same rate as the real GDP. What happens when the money supply grows slower than the real GDP is growing?

3. Provide two events that could shift Aggregate Demand to the right.Provide two events that could shift Long Run Aggregate Supply to the left.