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5. The Federal Reserve tries to influence the economy by changing the interest rate. Suppose the Fed wants to increase real GDP. Tell whether the Fed will raise or lower the interest rate. Ignoring any international effects, explain the effect the change in the interest rate has on real GDP and the price level. (While you do not need to draw any diagrams, your explanation should definitely include a description of how the Fed policy changes the aggregate demand curve and/or the (short-run) aggregate supply curve and should relate the change(s) to the effect on real GDP and the price level.)

6. The balance of payments has three accounts—the current account, the capital account, and the financial account. Discuss what is included in the current account and the financial account. If the capital account is zero, what does that imply for the current account and the financial account?

1 (7 points). Find the rate of change for between x = 3 and x = 6.   2 (7 pts). Consider the function   Find the rate of change between x1 = 1 and x2 = 1.001. (Note: Need to keep six decimal places in the middle of calculation.)

Balance of Trade/Exchange Rate

2. How does a tariff on an imported good affect domestic consumers of the good, domestic producers of the good, and the overall domestic economy? (No need to be overly technical; tell the effect of the tariff, and whether this effect makes domestic consumers of the good, domestic producers of the good, and the overall domestic economy better off or worse off.)

FCPA

4. What fiscal policies might the government undertake to increase real GDP? (Just tell what these policies are; you do not need to describe their effect on aggregate demand or aggregate supply.) Ignoring any international effects, explain how a fiscal policy designed to increase real GDP affects the interest rate. (While you do not need to draw any diagrams, your explanation must include a description of how the fiscal policy changes the relevant demand curve and/or supply curve and should relate the change(s) to the effect on the interest rate.)

U.S. wages are generally higher than wages in other nations. When economists compare the cost of saving jobs by imposing a tariff, a quota, or using other means, it is the case that cost to the U.S. economy ____ the wages of the jobs that are saved.

Extra Credit (Answer both or transfer to another university)

7. If foreigners decide to invest more in the United States, how does this affect the US balance of trade?