Problem 1 (10 marks)
Suppose GDP equals $300 trillion, consumption equals $24 trillion, the government spends $3 trillion and has a budget deficit of $500 billion.
Problem 2 (10 marks)
You take $500 that you held as currency and put it into the banking system. The reserve ratio is equal to 20%.
1) Calculate the money multiplier.
2) By how much will increase the total amount of deposits in the banking system?
3) By how much will increase the money supply?
Problem 3 (10 marks)
At the begening of 2018, a town has 152,000 employed people and 8000 unemployed people. The remaining 40,000
people in the town are not in the labor force.
Based on these numbers:
1) Calculate the town’s unemployment rate
2) Calculate the town’s labor force participation rate
3) Calculate Suppose that 10,000 people decide to join the labor force. Of these 10,000 people 7,800 find jobs. What is the unemployment rate at the end of 2018?
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