1. What are the necessary characteristics for an instrument to be used as money? Briefly explain each.

1. Explain how the individuals' desire to hold cash, and the banks' desire to keep excess reserve affect the money multiplier.

1. Explain the contractionary open market operations work.

1. Explain how the real interest rate affects the real money demanded and real money supplied.

1. Explain the changes that need to be made in all three tools of expansionary monetary policy.

1. Explain how the aggregate demand curve is negatively sloped through the impact of price changes in the money market.

1. Explain how progressive income taxes work as automatic stabilizers.

1. Explain how crowding out works with fiscal policy during recessions.

1. Explain what shape of the aggregate supply curve is considered desirable by policy makers and why.

1. Explain the impact of fast growing emerging markets on the US macro equilibrium.