- Describe the function of money in a market economy?
- If US Currency is no longer backed by gold or silver, what ultimately gives it value?
- Given an expansionary gap, what three monetary tools can policy makers use to encourage the economy to return to full-employment?
- Given a recessionary gap, what Federal Open Market Operations (FOMO) actions would the FED use to help the economy return to full-employment?
- Describe what FOMO actions can be used to reduce inflation. Include an explanation of how such actions cascade to cause the economy to return to full-employment (track the steps from FOMO action, to money supply, to interest rates, to aggregate demand, etc.)
- If the required bank reserves is 10%, how much total money will be created if banks received deposits from FOMO of $10 billion and then lent all their excess reserves? (Hint: use the money multiplier)
