Can I please get this questions answered?

Macroeconomics

Problem-set Mini Exam #4 - 30 points

Do not use red type for your answers. Please, show all your math. No math = no credit.

1. If the economy is currently suffering from a inflationaryGDP gap of $600B, and the MPC is .75, what policy options (consider both government spending changes and tax changes) could Congress undertake to close this type of a gap? (10 points)

2. If the rrr = 20% and you deposit $3,000 into your bank account, how much of it will banks have to set aside in their required reserve account (RR)? __________ How much will be left over to place into excess reserves (ER)? __________. Now, once ER changes, how much money can ultimately be created by our banking system? (4 pts)

3. Suppose the Fed sets the required reserve ratio at 25% and there are no excess reserves at the time (ER = 0 as you start this problem). If the Federal Open Market Committee (FOMC) buys $90 million in bonds from Bank A, how much will this ultimately change the money supply and in what direction (increase MS or decrease MS)? (3 pts)

4. Suppose the Fed sets the required reserve ratio at 20% and there are no excess reserves at the time (ER = 0 as you start this problem). If the FOMC sells $25 million in government bonds to Bank B, how much will this ultimately change the money supply and in what direction (increase MS or decrease MS)? (3 pts)

5. (4 pts) Fill in the blanks with one of the highlighted answers within each sentence. When fighting an inflation, monetary authorities (The Fed) can change the rrr. Do they want to raise the rrr or lower it to combat inflation? __________ The Fed can change the discount rate by raising it or lowering it to counter inflation? __________ The Fed would engage in buying or selling bonds to fight inflation? _________ Lastly, the Fed would pay more or pay less on excess reserves when fighting inflation? ________

6. (2 pts) Fill in the blanks using one of the highlighted words in the sentence. From Chapter 13, when fighting inflationusing fiscal policy, Congress would want to increase or decrease government spending? ___________ The other tool they can use is to either hike our taxes or cut them. Which would they do to counter inflation? ___________

7. Which policy (choose either monetary policy tools or fiscalpolicy tools) is better for fighting inflation, and why? This is not an opinion (your answer will be based on my lecture notes, so be sure to review them before answering this short essay). (4 pts)