The next five questions involve the following situation. An economy has a constant population. Everyone's demand for chequing deposits is 5,000 goods in total in every period. The economy has a total endowment of 10,000 goods per period. There is a total stock of unintermediated capital of 1,000 goods in each period. Bank deposits are the only form of money in the economy. Deposits of banks are subject to a 20 percent reserve requirement. The net real rate of return on capital is 10 percent per period. After meeting the reserve requirement, banks invest the remainder of all deposits into capital. Individuals do not hold capital. The fiat money stock is $2,000 per period. Capital takes two periods to generate final returns.

21. What is this economy's price level? (A) 0.2. (B) 0.3. (C) 0.4. (D) 0.5.

22. What is the total nominal money stock, M1t? (A) $20,000. (B) $10,000. (C) $2,500. (D) $1,500. 23. What is the money multiplier? (A) 20. (B) 10. (C) 5. (D) 2. 24. What is the total (nal) capital output after two periods? (A) 6,050. (B) 4,840. (C) 1,210. (D) 1,000.

25. What is this economy's real GDP? (A) 16,050. (B) 14,840. (C) 11,560. (D) 10,000.

The next four questions involve the following situation. An economy has 200 young people born each period. Each young person receives an endowment of 200 goods, but nothing when middle-aged or old. There is a storage technology and a bank. For each good put into storage in the current period, the person receives a single unit of consumption next period (a real return of zero). In addition, capital is available, which pays X = 1:25 two periods after it is acquired. If a person liquidates capital after one period, then only 0.8 units of the consumption good can be obtained. Assume that 10 percent of people want to consume only when middle-aged, and the remainder only want to consume when old; however, people only realize their preferences with regards to consumption when they reach middle-age. 26. How many goods does the bank hold in storage? (A) 0. (B) 4,000. (C) 36,000. (D) 40,000.

27. How many goods does the bank hold in capital? (A) 0. (B) 4,000. (C) 36,000. (D) 40,000.

28. If there is no bank run, how many goods will middle-aged people consume? (A) 0. (B) 4,000. (C) 36,000. (D) 40,000. 29. If there is no bank run, how many goods will old people consume? (A) 0. (B) 4,000. (C) 36,000. (D) 40,000.