1. On March 15, 2017, Federal Reserve Chairman Janet L. Yellen announced the Federal Reserve was raising its benchmark rate (the federal funds rate) by a quarter of a percentage point (to a range of 0.75-1.00 percent). This was the third time the Fed has raised rates after the Great Recession.

Consider the aggregate demand-aggregate supply diagram below, which represents the macroeconomy. Suppose the market is initially at an equilibrium at point A. What effect will the Fed's actions have on this economy?

options:

	Prices will remain unchanged.
	The price level will decrease.
	The price level could increase or decrease.
	The price level will increase.

2. Consider the following simplified balance sheet for a bank. Suppose the required reserve ratio decreases from 10 percent to 6 percent. What is the new money multiplier? Provide your answer rounded to two decimal places. Do not include any symbols, such as "$," "=," "%," or "," in your answer.

Assets		Liabilities
Reserves	$10 thousand	Deposits	$100 thousand

3.

Consider the following simplified balance sheet for a bank. Suppose the required reserve ratio decreases from 10 percent to 7 percent. How much of its deposits is the bank required to hold in reserves? Provide your answer in dollars measured in thousands rounded to two decimal places. Do not include any symbols, such as "$," "=," "%," or "," in your answer.

Assets		Liabilities
Reserves	$10 thousand	Deposits	$100 thousand

4. Suppose the supply of money, measured by M1, is $3.1 trillion, output, measured by real GDP, is $21.3 trillion, and the velocity of money is 6.0. Suppose the supply of money increases to $3.8 trillion but GDP and the velocity of money do not change. What is the percent by which prices change?