Explain the Federal Open Market Committee’s choice to lower the Federal Funds Rate and how it impacts the economy. Describe how this action impacts bank reserves, how this changes the loanable funds market (be sure to mention interest rate and lending levels and use a supply and demand model if its helpful), and business and consumer borrowing and spending. You can assume that leakages are minimal.

Describe some limitations to the FOMC’s traditional monetary policy strategy.

Identify and briefly explain any three factor which influence interest rates set by commercial banks

Describe M1, M2, and M3. Which is considered as the Money Supply?

The demand and supply for Fuji apples are given by Q^D = 17,500 - 25 P and Q^S = 10 P, where P is price per pound and Q is pounds of apples. What is the consumer surplus and producer surplus at the equilibrium?

The market for plywood is characterized by the following demand and supply equations: Q^D = 12,000 – 120 P and Q^S = 40 P, where P is the price per sheet of plywood and Q measures the quantity of plywood.

What is the size of the deadweight loss if the government imposes a price ceiling of $54 per sheet of plywood?

The demand and supply of iPhones in Texas is given by Q^D = 15,000 – 15 P and Q^S = 5 P-500, where P is the price per phone and Q is number of phones (in thousands).

If the Texas government levies a $10/unit tax on buyers, what is the size of the deadweight loss?

A basic assumption in economics is that people are self-interested. On the surface, that could imply that we are selfish since we are doing what is best for us. Provide 3 examples of why self-interested behavior does not necessarily mean selfish behavior.

If you compare the higher income countries with the lower income countries, you find that the people in the higher income countries tend to eat out more and the people in the lower income countries tend to consume more home-cooked meals. In your own words, explain how it may produce misleading comparisons of the standards of living between the higher income and the lower income countries.

The demand and supply for iPads can be expressed as Q^D = 120,000 – 280 P and Q^S = –75,000 + 500 P, respectively . Find the equilibrium price and quantity of iPads.

Consider the market for soy based (SB) livestock feed (i.e. cow food). The U.S. is one of the largest producers of soybeans, an ingredient used in livestock feed. Using just the information below, how do you expect the following two events to impact the market equilibrium of SB livestock feed:

1) A flurry of tornadoes swept across Iowa and destroy tens of thousands of acres of soybean crops.
2) A new study found livestock that ate soy based feed are healthier, larger, and are a more productive livestock than those that ate non-soy based feed.

Present a macroeconomic analysis of how aggregate supply and demand and macroeconomic equilibrium are expected to be affected by the economic incentives because of COVID

1. Airlines and hotels have many frequent-flyer and frequent-visitor programs in which individuals who fly the airline or stay at the hotel receive bonuses that are the equivalent to discounts.
   • Give two reasons why these companies have such programs rather than simply offering lower prices.
   • Can you give other examples of such programs?
   • What is a likely reason why firms whose employees receive these benefits do not require their employees to give benefits to the firm?

Part  I                                          Answer all questions

Q1) In addition to capital accumulation and technological progress, what are some of the other possible explanations for recent output growth in China?

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Q2) Will the CPI and GDP deflator always move together? Explain.

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Q3) First, explain why the money demand curve is downward sloping. Second, explain what factor(s) will cause shifts in the money demand curve.

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Q4) Based on your understanding of the IS-LM model, graphically illustrate and explain what effect a reduction in consumer confidence will have on output, the interest rate, and investment.

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------