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Problem Set 3

Due 12/12/19

1.

A person deposits $500 into a bank account. The reserve requirement is 25%.

a.

Set up the T-account

b.

What is the money multiplier?

c.

How much money is created?

d.

If the Federal Reserve purchased 100,000 in government bonds, how much money will

be created?

2.

The Federal Reserve sells bonds.

a.

Using a demand and supply model for loanable funds, show what happens to the supply

of money and interest rates

b.

Using the AD-AS model, show what happens to the price levels and real GDP

c.

What type of policy is this and why would the Federal Reserve employ this type of

policy?

3.

The US president engages in a trade war with China. Show in an AD-AS model how this might

effect the US economy

4.

A single person earned $200,000 in a year. Using the table below, answer the following

questions.

a.

What is the marginal tax rate?

b.

How much tax is due?

c.

What is the effective tax?

If taxable income is between	The tax due is
0-9,275	10 % of taxable income
9,276-37,650	927.50+ 15% of the amount over $9,275
37,651-$91,150	$5,183.75 +25% of the amount over $37,650
$91,151-$190,150	$18,558.75+28% of the amount over $91,150
190,151- $413, 350	$46,278.75 + 33% of the amount over $190,150
$413,351-$415,050	$119,934.75 + 35% of the amount over 413,350
$415,051 +	$120,529.75 + 39.6 % of the amount over $415,050

Answer 1

answered by: anonymous