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A bank: Assets = $100B; Deposits = $88B; Other debt = $8B; Capital = $4B. Asset values fall 6%. Is the bank solvent?

A student proposes: (1) Lower the reserve ratio from 15% to 5%; (2) Print money to fund government infrastructure (roads); (3) Subsidize university education. Evaluate each component’s effect on LONG-RUN price level and LONG-RUN real GDP per capita.

Which sequence CORRECTLY traces how a discount rate INCREASE ultimately affects nominal GDP?

A nation has L=200, K=400, H=100, N=50, A=2, and Y=960. The government admits 100 new immigrant workers (no additional K, H, or N). What happens to Y/L?

What is the key difference between the RECOGNITION lag, DECISION lag, and IMPLEMENTATION lag in fiscal policy? For each, identify which is longest for fiscal policy.

The Ricardian Equivalence theorem suggests that a tax cut financed by government borrowing has NO effect on AD because households, anticipating future tax increases to repay the debt, save the entire tax cut. If Ricardian Equivalence held perfectly, what would the tax multiplier equal?

The natural rate of unemployment u_N in the United States has been estimated to range from approximately 4% to 6% over the past several decades. Which of the following factors would LOWER u_N (shift the LRPC left)?

Policymakers observe that the economy is in a recessionary gap (Y < Y_N). They debate (i) expansionary fiscal policy, (ii) waiting for self-correction, or (iii) expansionary monetary policy. Compare all three options in terms of their effect on the long-run price level.

The slope of the SRAS curve is 1/a. If a is very large (approaching infinity), what shape does the SRAS approach, and what does this imply?

At the Zero Lower Bound, the Fed uses Quantitative Easing (QE) by purchasing $1 trillion of mortgage-backed securities (MBS). Compare QE to conventional open market operations in terms of: (i) the assets purchased, (ii) the interest rates targeted, and (iii) the transmission mechanism to AD.