1. Assume the following asset values (in millions of dollars) exist in Goldmania: Savings deposits, including money market deposit accounts (MMDAs) = $70; Checkable deposits = $800; Small-denominated (less than $100,000) time deposits = $50; Coins in circulation = $20; Federal Reserve Notes or Bills in circulation = $400; Money market mutual funds (MMMFs) held by individuals = $200; Corporate bonds = $100; gold deposits in banks = $30; Currency in commercial banks = $60.

a. What is the value of M1 in Goldmania?

b. What is the value of M2 in Goldmania?

2.Assume that Jimmy Cash has $2000 in his checking account at Folsom Bank and he deposits $400 from his tip income in it. By what dollar amount, if any, did the i) M1 and ii) M2 change because of this single, isolated transaction? Show all your work.

3.Suppose the price level in year 2016 is 100 and $100 buys 100 notebooks that year. If the price level rises to 125 in year 2017, what is the new value or purchasing power of the dollar? If, instead, the price level falls to 80, what is the value or purchasing power of the dollar?What relationship do you find between the U.S. price level and the value of the dollar?

7.Suppose the economy is having a deep recession, real GDP is substantially smaller than potential GDP, and the economy is facing serious unemployment.The Fed's objective is to fight unemployment.

a)Drawing and using a fully labeled supply and demand for money figure, show the effects of an appropriate monetary policy on the interest rates.

b)List three different ways in which the Fed can implement the monetary policy you describe in a).

c)STARTING WITH A CHANGE IN INTEREST RATES, write down the steps through which the change in interest rates that you find could succeed in fighting deep recession and serious unemployment.

d)Repeat the exercise for the situation when the economy is having high rates of inflation and the Fed's objective is to fight inflation.

4. Suppose Big Bucks Bank (ONE of the many banks in the country) has the simplied balance sheet shown below and that the reserve ratio is 10 percent: Assets Liabilities and (1) 42) net worth (1) =0) Reserves $22,000 Check. deposits $100,000 Securities 38,000 Loans 40,000 a. Calculate the excess reserves the bank has. What is the maximum amount of new loans that this bank can make? b. Show in column 1 how the bank's balance sheet will appear after the bank has lent this maximum amount of new loans to a DEPOSITOR in this bank. Explain this balance sheet. c. By how much has the supply of money changed? Explain where in the balance sheet the new money appears. d. Show in column 2 the bank's balance sheet after the bank has lent the maximum amount of new loans you calculated in part a). to a NON-DEPOSITOR in this bank. Explain this balance sheet. e. By how much has the supply of money changed? Explain what form this new money takes. f. What is the money multiplier for this country's banking system? 5. Suppose a bond with no expiration date has a face value of $10,000 and annually pays a xed amount on interest of $800. Compute and enter in the spaces provided either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. What generalization can be drawn from the completed table? Bond Price Interest rate % $ 8,000 8.9 10,000 11,000 6.2 6. Alpha's balance of payments data for 2017 are shown below. All gures are in billions of dollars. What are its (a) the balance on goods, (b) the balance on goods and services, (c) the balance on current account, and (d) the balance on capital and nancial account? Goods exports $40 Service exports $15 Alpha's purchases of assets Net investment income -5 abroad 40 Service imports 10 Goods imports 30 Net Transfers +10 Foreign purchases of Balance on capital account 0 Alpha's assets 20