1.The economy is in the short run equilibrium, at the point given below:

Price level = 130,

SR QD = 4 trillion

SR QS = 4 trillion

(LRAS = 4.3 trillion)

Consider Classical economy for this question. Using appropriate graphs, explain the impact of the economy in the long-run equilibrium.

2.a. Now consider Keynesian economy. Using details from Q (1), should the govt increase/decrease expenditure? By how much, given MPS = 0.4

b. Now consider, the presence of crowding out effect along with the effects from part (a). Using information in part (a), what is your new answer

3.Considering your answer in Q (2), the govt deficit increases. Explain why and also show the impact in the market of loanable funds using a graph.

4.Using the information from Q (1) & (2), govt now decides to conduct monetary policy. Explain all the tools the govt can use and explicitly mention how for this particular scenario.

5.With the help of a graph, explain the impact of using the tools in Q (4) in the long run equilibrium.

6.Will the tools used in Q (4) always works? Explain two such scenarios when it will not. Will the tools used in Q (4) always works? Explain two such scenarios when it will not.

7.Using information from Q (4), answer using the help of a graph, how would expect the output to reach maximum level in the monetarist perspective.

8.What do you think in your opinion is the best policy the govt can take in order to restore output level at the full employment level. Discuss

9.Suppose upon graduation, you land a job which pays you TK 60,000/month, including two festival bonuses (each being 50% of your monthly salary) per year. Giving detailed breakdown, how much should you pay in taxes?

10.Explain the Laffer curve and denote the optimal tax rate.