- Describe fractional reserve banking. Explain the link between fractional reserve banking and banking panics. Explain how FDIC insurance breaks this link. Explain how banks create demand deposits. Describe the process that allows a dollar of high powered money to support multiple dollars of demand deposits. Explain how M1 collapsed during the depression of the 1930s while the quantity of high powered money in the banking system expanded. Describe the federal funds rate. Explain why the Fed targets the federal funds rate in the conduct of its monetary policies. Define each of these terms: bank reserves, required reserves, excess reserves, high powered money, coin and currency in circulation, M1, required reserve ratio, demand deposits, and the money multiplier. Give each part of this question a separate paragraph. 2. Write out the entire Keynesian model. Solve this model for its equilibrium solution. Calculate equilibrium real GDP, consumption, investment, exports, and import. Prove that your calculations are correct. Assume that this economy is operating below its potential. Describe and explain all demand management policies that could b d to help this economy recover. Assume this economy is operating $1,000 below its potential. Calculate the individual change in G, T, and I necessary to make up this gap. C bar= $100, MPC = .95, T bar = $50, i bar= .05, alpha zero bar = $25, I bar = $200, alpha one bar = $15, G bar = $100, X bar = 510, alpha two bar = $5, M bar = $15, and alpha three bar = $3. Give each part of this question a separate paragraph..
Sample Solution
example, on Venus, where heat and sunlight are more intense than on our planet, the climate situations are very encouraging and favorable to love affairs. The Venusians (named Céladons and Silvandres) are intelligent and lively but all are sterile, except a very little number of procreators and the Queen who is tremendously productive. Millions of offspring are descended from her and this fact is quite parallel to the bee kingdom on the Earth. The Marchioness seems very amazed! Fontenelle passes very little time on the case of Mars, a planet which seems to be very much alike to the Earth. According to him, Mars has nothing extraordinary and itâs not worth mentioning it. But, Jupiter, Saturn and their moons seem to be more interesting and are worthy of being habitable. The inhabitants of Saturn whose are very far from the Sun are very wise and phlegmatic. They never laugh and they require a whole day to answer the least question one asks them. What about far away in the universe? All the stars are so many su>
example, on Venus, where heat and sunlight are more intense than on our planet, the climate situations are very encouraging and favorable to love affairs. The Venusians (named Céladons and Silvandres) are intelligent and lively but all are sterile, except a very little number of procreators and the Queen who is tremendously productive. Millions of offspring are descended from her and this fact is quite parallel to the bee kingdom on the Earth. The Marchioness seems very amazed! Fontenelle passes very little time on the case of Mars, a planet which seems to be very much alike to the Earth. According to him, Mars has nothing extraordinary and itâs not worth mentioning it. But, Jupiter, Saturn and their moons seem to be more interesting and are worthy of being habitable. The inhabitants of Saturn whose are very far from the Sun are very wise and phlegmatic. They never laugh and they require a whole day to answer the least question one asks them. What about far away in the universe? All the stars are so many su>
