1.Illustrate and explain with appropriate diagrams why having a goal of a fixed $C would complicate the implementation of an expansionary monetary policy.

2.Illustrate and explain with the aid of appropriate diagrams the difference between the monetary adjustment mechanism and monetary validation when a positive GDP GAP exists.

3.Illustrate and explain with appropriate diagrams why the actual budget deficit may change yet leave the cyclically adjusted deficit (CAD) unchanged, while if the CAD changes it will change the actual budget deficit.

4.Given the following information calculate Ye and answer the questions below.

C = 50+ .8Yd, I = 50, G = 150, X = 150, MPM = .2 and Tx rate = .2.

a.What is Ye?Draw an AE diagram to illustrate your answer.

b.What is Ce at Ye?

c.What is the budget balance at Ye?

d.If Y* is $20 more than Ye what is the cyclically adjusted deficit?

e.If government increases G by $20 to close the gap illustrate with the AD-AS diagram and the AE diagram and explain the impact on Ye.

5.Illustrate and explain with appropriate diagrams the implementation of a tight money policy.

6.Illustrate and explain with appropriate diagrams why multiplier when the price level changes is different from the simple multiplier.

as soon as possibe any 4