EXHIBITS

Economic Information X Economic Measure Amount Nominal GDP (current level) $1,435 billion Nominal GDP (frictional employment only) $942 billion Nominal GDP (structural employment only) $613 billion Nominal GDP (cyclical employment only) $180 billion Marginal propensity to save 30% Nominal interest rate 5.5% Nominal inflation rate 3.2%Email X To: Annand Conner, Finance Officer From: Leona Hudson, Finance Manager RE: Proposed government policies Hi Annand, The government announced yesterday that it is planning to implement the following policies and is seeking public opinions: (1) A fiscal policy of increasing governmental expenditures by $60 billion (2) A monetary policy of $80 billion of quantitative easing Please help investigate the economic implications of the policies to aid our planning for the following year. Thanks, LeonaNews Article X Economists Debate Government's Quantitative Easing Proposal Case for Quantitative Easing (QE) Proponents of QE argue that money injection has been shown to effectively stimulate economic recovery, especially during periods of stagnant growth. When money is injected into the economy, it increases the usable funds in the market. As a result of the increased supply, banks reduce interest rates to encourage borrowing by companies and consumers. As companies and consumers spend more, the economy expands. Case against Quantitative Easing (QE) Critics contend that as the money supply increases and people use it to buy goods and services, the velocity of money decreases. Following the three rounds of quantitative easing in the last financial crisis, the velocity of money has fallen from 6.4 times to the current level of 4.1 times. It is projected to fall to 3.6 if the government's most recent QE proposal is implemented.Item/Question Amount 1. Current money supply level (in billions) 123 2. Effect of the monetary policy on GDP (in 123 billions) 3. Effect of the fiscal policy on GDP (in billions) 123 4. GDP level relative to full-employment GDP if the E monetary policy is implemented 5. GDP level relative to full-employment GDP if the E fiscal policy is implemented