To receive full credit for each question, your answers must be at minimum 15 sen

Question

To receive full credit for each question, your answers must be at minimum 15 sentences long, it must answer every part of the question, it must include economic concepts that were taught in class and where necessary provide real world examples and empirical data. You must also explain your conclusions. Let me repeat, an answer that only states a conclusion and does not explain how you got to that conclusion will be marked down. Do not copy notes directly. Your answers must be in your own words. Do not plagiarize. You may work in groups, use the textbook, your notes, lecture notes posted on blackboard, the internet, articles and books, or other sources that you might find useful. However, if you are using an idea by someone else, you must cite her or him in the exam and add a reference page although you are not required to cite.

Question — Money

“The United States can pay any debt is has because we can always print money to do that.  So there is zero probability to default” (Greenspan)

“It’s not tax money.  The banks have accounts with the Fed much the same way that you have an account in a commercial bank.  So to lend to a bank we simply use the computer to mark up the size of the account that they have with the Fed” (Bernanke)

Explain in detail the two views towards money.  What does scarcity have to do with ideas of money if any?

When economists talk about the Money Supply, what exactly are they referring to?  That is, what components make up the Money Supply? Does an increase in reserves in the banking system lead to inflation? Explain why or why not.  Which institution creates the majority of the Money Supply, the government or the banks? In the balance sheets of the Federal Reserve, Commercial Banks & Thrifts and HHs & Firms whose assets are whose liabilities?  What does looking at a balance sheet tell us about the definition of money?  

If the federal government does not “need” your money to spend, why is it taxing you? What does this tell us about the reason why we accept U.S. currency as a means of exchange?

Because GDP = NI, we get the equation 0 = (I-S) + (G-T) + (X-M).  This equation is reflected in the graph below.  What do the equation and the graph tell us about the relationship between government deficit and private sector surplus?  Why is the graph a mirror image?  If you own government securities, is this a debt or a credit from your perspective?  

Why would Hamilton say, “anything that is technologically feasible is financially possible” (1987)?  What are society’s real constraints?  What solutions are available to us to remedy some of these problems?

Explanation / Answer

no country has a facility to print the currency whenever they required and they should be follow the central bank regulations. if the money is printed more than needed, it leads to inflation and scarcity of money causes to lesser development. so, nations central banks will plan in such a way that balancing these two objectives.

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