1. Why is M2 sometimes a more stable measure of money than M1? Explain in your own words using the definition of M1 and M2.
2. For each of following, determinate weather it is an asset or liability on the accounting books of a bank. Explain why in each case.
3. Illustrate each of the following situations with a graph showing short-run aggregate supply:

a. A decrease in the size of the labor force.

b.An increase in available capital.

c.c. An increase in productivity because of a technological change.

d.d. A decrease in the price of oil.

Describe the Fed's tendency to "lean again the wind" Do the Fed's polices tend to stabilize or destabilize the economy?

Two separate capacity constraints are discussed in this chapter: (1) the actual physical capacity of existing plants and equipment, shown as the vertical portion of the short-run