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There are 3 parts to this assignment, please answer each with at least 100 for parts 1&2 words and any references used.

Parts 1 & 2 DUE ON 07/06/13 3:30 US pst. Time Los Angeles

Part 1.

What are the short- and long-term economic benefits and costs associated with our current high federal government budget deficits? Do you think the economic benefits outweigh the economic costs, or not? Why? If you wished to reduce the budget deficit, how would you advocate that be accomplished?

Part 2

Answer each of the following questions and provide complete explanations for your answers:

1. Is all unemployment “bad?” Explain.

2. What types of unemployment might actually be “good” or necessary?

3. Is it possible for the number of employed workers to increase while the unemployment rate rises? Explain. Some help: Although we tend to look at unemployment as all bad, there are some arguments for having some folks looking for work at any given time in our economy. Think of it from the employer’s point of view when searching for skilled workers to fill their job vacancies.

When we look at the types of unemployment (it might be helpful to list and define them in your post) that might be good, is there an optimal unemployment number that we should strive to achieve? If so, what is that number and how is it determined?

Lastly, when tackling the last question look also at how the unemployment rate can decrease, even when there are fewer jobs than ever. This is something that has been occurring at times over the past several years in our own economy and it is not good.

Part 3 Due on 07/08/13 3:30 US pst. Time Los Angeles

See second attachment

Part

3

unit Assignment

Question:

In Westlandia, the public holds

5

0% of M

1

in the form of currency, and the required reserve ratio is

2

0%.

1. Estimate how much the money supply will increase in response to a new cash deposit of $500 by completing the accompanying table.

(Hint: The first row shows that the bank must hold $

10

0 in minimum reserves — 20% of the $500 deposit — against this deposit, leaving $

4

00 in excess reserves that can be loaned out. However, since the public wants to hold 50% of the loan in currency, only $400 × 0.5 = $200 of the loan will be deposited in round 2 from the loan granted in

Round

1.)

$400.00

$200.00

$200.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Round	Deposits	Required reserves	Excess reserves	Loans	Loan proceeds held as currency	Loan proceeds deposited
1	$500.00	$100.00		$400.00			$200.00
2
3
4
5
6
7
8
9
10
totals

2. How does your answer compare to an economy in which the total amount of the loan is deposited in the banking system and the public does not hold any of the loans in currency? (Hint: Do another table with none of the loan proceeds held in currency.)

3. What does this imply about the relationship between the public’s desire for holding currency and the money multiplier?