1) What is the market for loanable funds?Use the analysis of loanable funds to examine various government policiesas follows:

1.1) Tax incentives for saving 1.2) Investment tax credit 1.3) Budget deficitWhatisthemarketforloanablefunds?

3) Illustrate the effects of the following developments on both theshort-runnandnlong-run Phillipscurves.Give the economic reasoning underlying your answers.

3.1) A rise in the natural rate of unemployment 3.2)Adeclineinthepriceofimportedoil

3.3) A rise in government spending

3.4) A decline in expected inflation

4) Explain how each of the following developments would affect thesupply of money,the demand for money,and the in inerest rate. Illustrate your answers with diagrams.

4.1)TheBank ofThailand's bond traders buybonds in open-marketoperations. 4.2)An increase in creditcard availability reduces the cash people hold.

4.3) The Bank of Thailand reduces banks' reserve requirements. 4.4)Households decide to hold more money to use for holiday shopping.

4.5) A wave of optimism boosts business investment and expands aggregate demand.