Question

Chapter 12:

How was the author of the News Wire (chapter 12 of your text) so confident that a recession was coming? (Be sure and include what happened to the job market, the stock market, the housing market and anything else you consider to be pertinent)

Chapter 13:

Does the fact that your bank keeps only a fraction of your account balance in reserve worry you? Why don't people rush off to the bank and retrieve their money? What would happen if they did?

Chapter 14:

How does an increase in the money supply get into the hands of consumers? What do they do with it?

Answer 1

Here I am giving the answers according to my point of view. Please do not claim or blame anyone.

I don’t know "How was the author of the News Wire so confident that a recession was coming?" But, if country’s growth rate get downward direction for example production of goods and service are shrunk, due to any reason like political, climatic conditions, war, global crisis, series of draughts and etc. the recession will be happened in the country. Due to recession the huge amount capital flight will happen in stock markets, job market will be get more tightened as production is affected the unemployment increases. As Prof. Okun said that if country’s unemployment increases then Doubled the GDP decreases.

Banks are keeping the certain amount of reserve with central bank. and they were not keeping our minimum balance as reserve. If people rush off to the banks and retrieve their money, this scenario will happen only in case of when people lose confidence in banking system and banks are not able proof, and this scenario will further lead to collapse of banking system.

If increase in money supply get into the hands of consumers, they will demand more unnecessarily. As demand increases suddenly but production cannot. This will increase the general price level of the goods and services. it causes the inflation.