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Major Assignment . THIS IS COPYRIGHTED MATERIAL
Answer all questions. Answer all questions in your own words.
You are invited to Washington, DC to meet with President Biden to discuss USA Economic Policy. While meeting with him, he asks you, to explain to him in your own words, some important components of fiscal policy (FP) and monetary policy (MP). He needs to cut the meeting short because he has to attend an emergency meeting. He asks you to write him a letter. THIS IS COPYRIGHTED MATERIAL02
These are the questions he asks you:
1. In your own words, how would you compare and contrast expansionary fiscal policy and contractionary fiscal policy? When, why and how are they used? (15 pts). THIS IS COPYRIGHTED MATERIAL
2. In your own words, explain what the Crowding Out Effect (COE) is. Please explain the COE to me – I know it is important. Why is it important that I know about this? Explain the costs and benefits of the COE in both the short run and the long run. How is the loanable funds market connected to this and what are the effects on Consumption, Investment, and interest rates. (15 pts). THIS IS COPYRIGHTED MATERIAL
3. One day I hope the US Government runs a budget surplus. If we ran a government surplus, what is the best way to manage that surplus? Explain to me what we should do and why? And, please do so, in your own words. (5 pts). THIS IS COPYRIGHTED MATERIAL
4. There is a lot of material and concepts concerned with FP and MP. In your own words, explain to me all of the following. Again, in your own words: prime rate, discount rate, federal funds rate, required reserve ratio, total reserve, excess reserves, and required reserves. (15 pts). THIS IS COPYRIGHTED MATERIAL
5. As President, I think the Fed is a great institution for our nation. In your own words, please explain to me the structure of the Federal Reserve System, including the FOMC. Why and how is the Fed is insulated from political pressure due to this structure? (10 pts). THIS IS COPYRIGHTED MATERIAL
6. In your words, how would you compare and contrast an easy money policy and a tight money policy? When, why, and how is each policy used? I want you to address how each of the 4 tools of monetary policy is used in detail in an easy money and tight money situation.
(This is a 40-point question. This answer should be at least 4-5+ detailed paragraphs. (40 pts). THIS IS COPYRIGHTED MATERIAL