Explain the relationship between aggregate demand and gdp

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Reference no: EM133195739

Assignment:

I. DEFINITIONS. Define 10 terms. Provide examples where pertinent.

Investment Producer Price Index

Monetary base Velocity

Consumer Price Index Price deflator

Business Cycle Bank Reserves

Demand Deposits Gross Domestic Income

Time Deposits Treasury securities (bonds)

Assets Liabilities

Policy Equity

II. ESSAY QUESTIONS. Answer BOTH questions. Answer all parts to each question.

1. a) What is GDP? Provide at least two interpretations of the concept GDP.

b) Explain the relationship between Aggregate Demand and GDP.

c) Develop a mathematical model explaining GDP, and describe the impact of each its components.

d) What is the Keynesian theory of the macro economy? Use the AD/AS model to explain.

e) What is Fiscal policy?

What are the goals of Fiscal policy?
What are the tools of Fiscal policy?

f) Explain how contractionary fiscal policy would be implemented. What are the difficulties in implementing this?

g) How effective do you believe fiscal policy to be?

2. a) What is money? What, today, comprises money?

b) What is monetary theory? Explain the Equation of Exchange.

What is the role of money in the Macro economy?

c) What is the Federal Reserve? What are its important functions?

d) What is monetary policy? Why are banks the means (mechanism) by which monetary policy must work?

e) What are the goals of monetary policy?

f) What are the tools of monetary policy? Explain each.

g) What is the target variable?

h) Give an example of expansionary monetary policy, showing the role of the Fed, banks, and any other economic entity.

Reference no: EM133195739

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