1. Answer the following using this graph. (40 points) Price level Patential output SRAS AD Real M a. What type of gap is

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1 Answer The Following Using This Graph 40 Points Price Level Patential Output Sras Ad Real M A What Type Of Gap Is 1 (35.36 KiB) Viewed 43 times

1. Answer the following using this graph. (40 points) Price level Patential output SRAS AD Real M a. What type of gap is illustrated in this graph? b. If the Federal Reserve decides to use Monetary policy to fix the economy, what would their goals be for the following 1. For Aggregate Demand to INCREASE or DECREASE? 2. For the Money Supply to INCREASE or DECREASE? What are the three traditional Monetary Policy tools and how might the Fed use them in this scenario? 2. Describe the "four functions of money. What is a Double Coincidence of Wants and why does that make barter a less desirable system of obtaining goods and services? (20 possible points) 3. For each of the following questions, evaluate whether the statement is "true" or "false". Then, provide a brief explanation to justify your answer. (40 possible points) à An example of progressive taxing is if John's income increases one year from $20,000 to $30,000, then his income tax due increases from $1,000 to $3,000 b. If the required reserve rate is 10%, bank runs will be less likely than if the required reserve rate is 20% C. If the Fed executes an Open Market Sell, the money supply will increase d. Credit cards are part of the M1 definition of the money supply.