10.Assume that the reserve requirement is 20%.Also assume that banks do not hold excess reserves and there is no cash held by the public. The Fed decides that it wants to expandthe money supply by $40 million.(Chpt. 14)

a.If the Fed is using open-market operations, will it buy or sell bonds?

b.What quantity of bonds does the Fed need to buy or sell to accomplish the goal? Explain your reasoning.

11.Suppose that this year's money supply is$500 billion,nominal GDP is$10 trillion,and real GDP is$5trillion.(Chpt. 15)

a.What is the price level? What is the velocity of money?

b.Suppose that velocity isconstant,and the economy's output of goods and services rises by5%each year. Whatwill happen to nominal GDP and the price level next year if the Fed keeps the money supply constant?

c.What money supply should the Fed set next yearif it wants to keep the price level stable?

d.What money supply should the Fed set next year if it wants an inflationrateof10%.

12.Explain whether each of the following events shifts the short-run aggregate-supply curve, the aggregate-demandcurve, both, or neither. For each event that does shift a curve, draw a diagram to illustrate the effect on the economy.(Chpt. 16)

a.Households decide tosave a larger share of their income.

b.Florida orange groves suffer a prolonged period of below-freezing temperatures.

c.Increased job opportunities overseas cause many people to leave the country.

13.For each of the following, what is the effect on the Philips Curve?(Chpt. 16)

a.Inflationary expectations fall

b.The supply of a major input to production increases

c.Labour productivitygrowth rates rise

14.For each ofthe following events, what is the effect on the SRAS and LRAScurves?(Chpt. 16 (SR)and Chpt. 17(LR))

a.The labour force grows

b. The amount of capital in the economy increases

c. Labour productivityrises

d. Energy prices rise

15.Explain whether each of the following events will increase, decrease, or have no effect on long-run aggregate supply.(Chpt. 17)

a.The United States experiences a wave of immigration.

b.Congress raises the minimum wage to $10 per hour.

c.Intel invents a new and more powerful computer chip.

d.Asevere hurricane damages factoriesalong the East Coast

16.Explain why the following statements arefalse.(Chpt. 17)

a."The aggregate-demand curve slopes downwardbecause it is the horizontal sum of the demand curves for individual goods."

b."The long-run aggregate-supply curve is vertical because economic forces do not affect long-run aggregate supply."

c."If firms adjusted their prices every day, then the short-run aggregate-supply curve would be horizontal."

d."Whenever the economy enters a recession, its long-run aggregate-supply curve shifts to the left."