1.Assume an economy is represented by the following:

C = 200 + 0.85Yd

T = 1800

G = 2000

I = 200

a.Suppose actual output is 3000. What is the level of planned expenditures at this level of output? (2 marks)

i.What is the level of unplanned changes in inventories? (1 marks)

b.Calculate the equilibrium level of output. (2 marks)

c.Based on your analysis in Part (b), calculate the levels of consumption and saving that occur when the economy is in equilibrium. (2 marks)

d.Now suppose that G decreases by 200 and T simultaneously decreases by 150. Calculate the new equilibrium level of income.(3 marks)

e.Determine if the economy is operating with a deficit or surplus.(1 marks)

2.1.Assume there is an economy with a single bank, and the central bank sets the reserve requirement ratio at 10%. Assume also that the only bank had no transactions (i.e., no loans, reserves, or deposits) prior to an individual who deposits $1000 of currency with the bank.

(a)As a result of this deposit, calculate the amount of required reserves, actual reserves, and excess reserves. (2 marks)

(b)After the bank has issued the maximum amount of loans, what will be the total amount of loans, deposits, and money in the economy?(3 marks)

(c)What is the size of the money multiplier for this economy?(1 marks)

{Met rate, r +_____ : I I I I I I I __-_-_.I____ I I I I I I I I I I I I I I O 1. S en. 544 neg Mun-cry, M 14. Using the graph above, answer the following questions. a. At what point would there be an excess demand for money and describe the process to equilibrium? {2 marks} b. At what point would there be an excess supply for money and describe the process to equilibrium? {2 marks} c. What would be the result if the central bank engages in expansionary monetary policy? {3 marks}