Please answer the questions below

1. The typical household buys the following basket of goods within a year:

	Quantity	2020	2021	2022
Cereal	10 boxes	$3.00	$3.50	$4.00
Milk	15 gallons	$3.50	$3.65	$3.75
Eggs	20 dozen	$3.85	$3.95	$4.15
Price of the basket	------
CPI	------

A. Find the price of the baskets. (Hint: multiply price and quantity for all goods and then add the totals)

B.Using 2020 as the base year, calculate the CPI for each year.

C.What is the inflation rate from 2020 to 2021?

D.What is the inflation rate from 2021 to 2022?

2. Using the demand and supply for loanable funds and the AD-AS model, illustrate what happens in the economy when the Federal Reserve decides to sell government bonds.

A.What type of policy is this?

B.Why would the Federal Reserve adopt this type of policy?

3. A person deposits $5000 into an account and the reserve requirement is 12.5%.

A.Set up a T-account

B.How much is money created through fractional reserve banking?

C.If the Federal Reserve purchased $75,000 in government bonds, how much money would be created?

Individual Taxpayers If Taxable Income le Between: 0 - $0.0?5 10% of taxable income $9.8?5- $40,125 $33150 + 12% of the amount over $3,815 $401 26 - $35,525 $4151 150 + 22% of the amount over $40,125 $35,526 ' $153,300 $14,005.50 + 24% of the amount over $05,525 $153,301 - $201350 $33.2?1.50 + 32% of the amount over $153,300 $201351 - $513,400 $4135150 + 35% of the amount over $201350 $513,400 $156,235 + SHE. of the amount over $513,400