1. How does microeconomics relate to macroeconomics? (40 points)
2. Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers. (20 points each)

• The number of people at the most common ages for home-buying increases.
• People gain confidence that the economy is growing and that their jobs are secure.
• Banks that have made home loans find that a larger number of people than they expected are not repaying those loans.
• Because of a threat of war, people become uncertain about their economic future.
• The overall level of saving in the economy diminishes.
• The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.