1.What are the functions of money?

  1. What happens when the Federal Reserve buys bonds? Sells bonds?
  2. What can you conclude from the following: an increase in real gross domestic product (GDP), falling unemployment, and increasing inflation?
  3. In what phase of the business cycle will discount rates be lowered?
  4. What is a progressive tax? Give an example.
  5. What type of tax is a sales tax?
  6. What are regressive taxes? Give an example.
  7. What are the tools used by the Federal Reserve to control the economy?
  8. What are the tools used by the federal govt to control the economy?
  9. What are the economic goals of the government?
  10. If taxes are increased, what will happen to AD and GDP?
  11. How is national debt different than government deficits?
  12. What is a budget surplus?
  13. Draw and correctly label a production possibility curve for computers (on the vertical axis) and pizzas (on the horizontal axis). You do not need to number the axis or plot specific points.
  14. Draw and correctly label a supply and demand graph illustrating the current market for gasoline. Label the equilibrium price level as Pe and the equilibrium quantity as Qe.
  15. Draw and label the four phases of the business cycle, including labeling the vertical and horizontal axis.
  16. Draw and correctly label an aggregate demand and aggregate supply graph. Label the equilibrium price level as PLe and the equilibrium real GDP output as Qe.

Sample Solution