Homework # 5 Questions (Ch. 10~12). Total 40 points. EC2050-03&04 Principles of macroeconomics. Department of Economics1. Assume that there is neither the government sector nor the foreign sector (private closed economy). Derive the multiplier algebraically, using general notations suggested in the textbook (You may need to go back to Ch. 9 Appendix for this question) (3 points).2. Assume that there is private sector and the government sector. Assume further that the government imposes a lump-sum tax on income. Derive the multiplier algebraically, using general notations suggested in the textbook (3 points).3. Assume that there is private sector and the government sector. Assume further that the government imposes this time a proportional tax on income. Derive the multiplier algebraically, using general notations suggested in the textbook (3 points).4. Match each concept in Column A with a definition or example in Colum B (1 point for each).Column A Column Ba. Tax multiplier 1. Reduction in income tax ratesb. Disposable income 2. Unemployment compensationc. Expansionary fiscal policy 3. Y- T + TRd. Contractionary fiscal policy 4. G + TRe. Government outlays 5. Reduction in government spendingf. Automatic stabilizer 6. Intended investmentg. Injection into the circular flow 7. ? multipler * (mpc)5. Match each concept in Column A with a definition or example in Colum B (1 point for each).Column A Column Ba. Excess reserves 1. The ease of use of an asset as a medium of exchangeb. Barter 2. A measure of the money supply that includes currency, checkable deposits, and traveler?s checksc. Deflation 3. An institution such as a bank, savings and loan association, or life insurance company that accepts funds from savers and makes loans to borrowersd. Required reserves 4. A good used as money that is also valuable commodity in itselfe. Liquidity 5. When the aggregate price level fallsf. Commodity money 6. A medium of exchange that is accepted as money because the government says it has valueg. Fiat money 7. A measure of the money supply that includes all of M1 plus savings deposits, small certificates of deposit, and retail money market fundsh. M1 money 8. Exchange of goods, services, or assets directly for other goods, without the use of moneyi. M2 money 9. The portion of bank reserves that banks must keep on reservej. Financial intermediary 10. The portion of bank reserves that banks are permitted to lend to their customersk. Expansionary monetary policy 11. The idea that changes in the money supply affect only prices, not outputl. Velocity 12. The Federal Reserve open market sale of bondsm. Money neutrality 13. The number of times that a unit of money changes hands in a year6. Suppose that the Fed makes an open market sale of $15 million in bonds to HIJ Bank (1 point for each).(1) What is the effect on the Fed?s balance sheet?(2) What is the initial effect on HIJ Bank?s balance sheet?(3) Show in a graph the effect on the market for federal funds. (No numbers are necessary, for this or later sections of this question.)(4) Assuming that the level of business confidence remains unchanged, show on a graph how this open market sale will change the level of intended investment.(5) What is the effect on aggregate demand and output? Show on a carefully labeled graph.7. Explain the following concepts in one paragraph with maximum three sentences (2 points for each)(1) Quantitative easing (QE)(2) Liquidity trap(3) Credit rationing

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