Macroeconomics

Part A

1.Why is the money multiplier in the United States smaller than the inverse of the required reserve ratio? Provide one (1) reason.

2.Explain why depositing cash into a checking account does not change the money supply. Provide one (1) supporting fact.

3.Explain why the money supply does not change when one individual writes a check to another. Provide one (1) supporting fact.

Part B

Price Long-run AS M level P Short-run AS a Short-run AS e b To C T AD d My ( P ) Me ( P, ) yo y1 Output y Money Market I, Investment (A) (B) (C)