Please read this below and if you are up for the challenge please firstly summarize it, secondly and seperately explain how it relates too macroeconomic issues such as the business cycle, growth and inflation and lastly and seperately critique it in your opinion.

The Federal Reserve, which invested trillions of dollars to prop up the American economy after the 2008 financial crisis, is finally ready to take away the crutches.

The Fed is expected to announce on Wednesday that it will gradually reduce its $4.2 trillion portfolio of United States Treasury debt and mortgage-backed securities, a move that would amount to a vote of confidence that the economy's slow-but-steady growth is likely to continue.

The Fed, concerned about the reaction in financial markets, has tried to eliminate any suspense by publishing a detailed schedule and promising to move very slowly. But just as the Fed's bond purchases after the 2008 crisis were unprecedented, the retreat will again take the reserve banking system into uncharted territory. No one can be certain what will happen.

"What the Fed is going to Find this week will not surprise anyone," said Lewis Alexander, chief United States economist at Nomura Securities. "And the models predict a slow and smooth adjustment. But there is always a risk of more volatility."

Two large and related questions also remain unanswered. The Fed has not said how large it would like its balance sheet to be, so there is no finish line for the retreat. Also, there is a good chance the Fed's current leadership will not complete the journey. Janet L. Yellen, the Fed chairwoman, ends a four-year term in early February, and President Trump has not announced whether he plans to nominate her for a second term.

The Fed responded to the crisis that began a decade ago by cutting its benchmark interest rate nearly to zero, and by vacuuming up huge quantities of bonds. Both measures were designed to revive economic activity by reducing borrowing costs for everything from mortgages to car loans.

The first round of bond-buying, often called "quantitative easing," or QE, began during the crisis and there is broad agreement that it helped to bolster financial markets.

The second and third rounds, which came after the crisis, remain controversial.

Buying a bond is the same thing has lending money to the seller. Buyers compete by offering to accept lower rates. The Fed's massive purchases increased competition for available Treasuries and thus drove down interest rates.

In an April analysis, Fed economists reported that the purchases reduced the yield of the benchmark 10-year Treasury by 1 percentage point.

The Fed's purchases of mortgage bonds had a similar effect.

Fed officials, and a wide range of independent economists, argue that the downward pressure on Treasury rates rippled outward to other kinds of borrowing costs, as private investors moved into other markets in search of better returns.

These impacts, however, are difficult to measure, and some independent economists argue that any broad economic benefits were modest, at best.

"There has been an explosion of research, dozens and dozens of papers, and almost all of them agree that QE lowered bond yields," said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics. "The financial market effects are very clear. Did that stimulate growth? Did that stimulate inflation? It's always impossible to prove, but all the models we have imply it should have helped."

Critics foresaw negative consequences. A group of prominent conservatives warned in an open letter in 2010 that the Fed's purchases "risk currency debasement and inflation." Four years later, some signatories doubled down on those warnings. But there has been no resurgence of inflation. Indeed, the Fed is struggling with the opposite problem: Inflation has remained persistently below its 2 percent annual target.

The Fed's program was intended to encourage risk-taking by investors, but some critics warned it would create new asset bubbles. Those warnings have not yet been borne out.

The Fed's retreat began two years ago, when the central bank raised its benchmark interest rate for the first time since the crisis. It now sits between 1 percent and 1.25 percent. The Fed is not expected to raise rates on Wednesday. Job growth has remained strong this year, but some officials are worried about the persistent weakness of inflation.

The Fed plans to reduce its bond holdings with similar care. It plans to cut $10 billion a month for the first three months, divided 60-40 between Treasuries and mortgage bonds. It will then raise the pace by $10 billion every three months.

Mr. Alexander, and other analysts, see a number of factors likely to limit the impact on interest rates, at least in the short term. Both the European Central Bank and the Bank of Japan continue to buy bonds, putting downward pressure on rates. And the Treasury is issuing less long-term debt at the moment, reducing the volume of new securities that markets must absorb.

It is also not clear how much shrinking the Fed plans to do. It needs to hold about $1.5 trillion in bonds to meet demand for currency, which it puts into circulation by purchasing bonds. That number is projected to nearly double over the next decade.

The Fed also needs to hold hundreds of billions of dollars in bonds to maintain its current system for controlling interest rates, which it adopted after the crisis.

Jerome H. Powell, a Fed governor, said earlier this year that the new system is working well and the balance sheet is unlikely to shrink much below $3 trillion.

But maintaining a large balance sheet also means the Fed would remain a more prominent presence in short-term funding markets, where it has displaced some private activity. William Nelson, chief economist at The Clearing House, a trade group representing large banks, said the Fed should return to its pre-crisis operating procedures, which required a much smaller balance sheet.

"The pre-crisis framework worked very well. The Fed had very good control of rates and economic activity," Mr. Nelson said. "Nobody was complaining that the Fed's control of interest rates pre-crisis was not precise enough."

Another open question is whether the Fed would buy bonds in responding to a future downturn. Fed officials predict the benchmark rate will not rise much above 3 percent. That's a problem because during the past nine recessions, the Fed has cut the rate by an average of 5.5 percentage points to stimulate the economy.

In a speech last year at the Fed's summer conference at Jackson Hole, Wyo., Ms. Yellen pointed to asset purchases and forward guidance as the Fed's fallback plan. Those tools, she said, "will remain important components of the Fed's policy tool kit."

But Mr. Trump could choose a Fed chairman who disagrees. Kevin Warsh, an adviser to Mr. Trump who is among the possible candidates, resigned as a Fed governor in 2011 in part because he opposed the Fed's second round of asset purchases.

c. capital equipment, inventories, and structures d. None of the above 24. Coffee and tea are substitutes. Bad weather that sharply reduces the coffee bean harvest would increase the price of coffee and decrease the price of tea. b. increase the price of coffee and increase the price of tea. decrease the price of coffee and decrease the price of tea, d. decrease the price of coffee and increase the price of lea. 25. In 1969, Fritz bought a Ford Mustang for $2,500. If the price index was 36.7 in 1969 and the price index was 180 in 2006, then what is the price of the Ford Mustang in 2006 dollars? a $509.72 b. $6,866.49 c. $9.761.58 d. $12,261.58 26. Social Security payments are a, included in GDP because they represent payments for work performed in the past. b. included in GDP because they represent potential consumption. C. excluded from GDP because they are not private pensions. d. excluded from GDP because they do not reflect the economy's production. 27, In the actual economy, households a. spend all of their income, b. divide their income among spending, taxes, and saving. c. buy all goods and services produced in the economy. d. Both (a) and (c) are correct. Figure 6-4 10 20 30 60 50 28. Refer to Figure 6-4. Which of the following price controls would cause a surplus of 20 units of the good? a. a price ceiling of $4 b. a price ceiling of $5 c. a price floor of $7 d. a price floor of $84. Assume that a firm's short run cost function is C(q) =100q-4q' +0.2q' +450. What is the firm's short run supply curve?? If price is p=115, how much output does the firm supply? 5. Each firm in a competitive market has a cost function of C(q) = q-q' + q . There are an unlimited number of potential firms in this market. The market demand function is given by Q=24- p . Determine the long run equilibrium price, quantity per firm, market quantity and number of firms. How do these values change is a tax of $1 per unit is collected from each firm? 6. Assume that the inverse demand function for cheese is Q=100-10p and the supply curve is Q=10p. a. [Easy] What are the effects of a specific tax of $1 per unit on the equilibrium quantity and price, government tax revenue, consumer surplus, producer surplus, welfare and DWL? b. [Harder] What are the effects of a specific subsidy (negative specific tax) of $1 per unit on the equilibrium quantity and price, government tax revenue, consumer surplus, producer surplus, welfare and DWL? c. [Hard] The government, instead of a tax or subsidy, imposes a price support (minimum price) of $6. The way this is implemented is via a deficiency payment. This means the government will guarantee producers a price of $6 and the producers choose their output accordingly. They then sell that output to consumers at whatever price consumers are willing to pay for that total output (not $6!!!). The government pays producers the difference between the $6 dollars and the price consumers are willing to pay for all units produced. This payment is called the deficiency payment. What is the quantity supplied, the price that clears the market and the deficiency payment? What effect does this program have on consumer surplus, producer surplus, welfare and deadweight loss? d. [Medium hard] Now instead of any of the policies above, the government imposes a price ceiling of $3. That is it. Price is not allowed to rise above $3. How does equilibrium change (price and quantity)? What effect does this price ceiling have on consumer surplus, producer surplus and deadweight loss