Name:__Kori

Sandberg___________________________________

Section: ______T&R______

E-Portfolio Signature Assignment

Salt Lake Community College
Macroeconomics - Econ 2020
Professor: Heather A Schumacker
Please type your answers to the following 5 questions. If you need to hand draw the graphs and then scan them in you may. Make
your answers as detailed as you can show off what you know! When you have completed this assignment post it to your e-portfolio.
Make sure to put your reflection statement on your web site too. A reflection statement is one in which you relate how this assignment
has used information from prior classes or how it may be useful in the future. (4pts)

1.

What is the formula for PAE (write out the full name)? Circle the largest component and fill in the chart. Under each put the
components and something unique. (19pts)

PAE = ___Consumption_ + __Investment + __Government___

Components: consumption
Circle the largest category
1. Durable Goods
2.Nondurable goods
3. Services

+ ___(exports-imports)_____

Components: investment

Components: government

Components: (X-M)

1. Business Fixed investment

2. Residential Investment
3. Inventory Investment
Excludes:

1. Goods
2. Services

1. Exports
2. Imports

1.

Stocks and bonds

Excludes:
1. Transfer payments
2. Does not account for interest
paid on national debt

2.

Given the following information, what is the short-run equilibrium output (show your work) _______2610_________ What is the
autonomous expenditure _______1305__________ what is the induced expenditure ________.5y_________ where would it cross
the Y axis_______1305__________ what is the slope of PAE _________.5________ what is the multiplier
________2_________ if there is a 10 unit increase in PAE what will happen to the short run equilibrium (increase or
decrease)____decrease ____________ and by how much __________5 units_______ and will it lead to a recessionary gap or an
expansionary gap________expansionary_________
Ca = 890

Y=ca+mpc(y-t) +I+G+(X-M)
3.

MPC = 0.5

(9pts)

IP = 220

G = 300

X-M = 20

y=890+.5(y-250)+220+300+20 y=1305+.5y

.5y=1305

What is the problem associated with being at AD2 that makes policy makers concerned? (1pt)
______________Inflation. Too much AD_________

T = 250
y=2610

4.

Who does fiscal and monetary policy? What are 2 fiscal policies and 3 monetary policies to correct a situation where the economy
is naturally at AD* but finds itself at AD2, as seen in the graph on the previous page. Briefly explain how each of these policies
would work to correct the situation. (12pts)
Who does fiscal policy: ____The Government_________________
1.

___Fiscal restaraint__________________________________
_______Tax hikes or spending cuts intended to reduce inflation. Opposite of fiscal stimulus.
_____thus decreasing AD__________________________________________

2.

______Tax hikes_______________________________
______tax hikes shift AD to the left, reducing disposible income and thus consumption.

Who does monetary policy: ____________The Federal Reserve___________________

1.

____The reserve requirement_________________________________

______Requires the bank to hold a minimum amount of reserves. Changes in the reserve requirement are a
powerful weapon for altering the lending capacity of the banking system. __

2.

_________Discount Rate____________________________
Interest rate the fed charges commercial banks to borrow reserves. Since reserves can earn no interest, banks
have an incentive to maintain excess reserves at the minimum federal level. ___________________

3.

________Open market operations____________________________

___Buying and selling treasury securities (bonds) Primary tool for affecting the supply of bank reserves and the
supply of money._________________________________________

5.

Use the excel sheets provided to complete this problem. Scenario 1: If the initial deposit into a bank is $5,000 and the reserve
requirement is 10% use formulas to fill in the chart all the way to completion (where there will be 0 for new deposits). Use
formulas and cell references whenever possible. Fix the cell references for the reserve requirement when entering your formulas
on the first line such that you can drag your information down the rows. Fixing a cell reference is done by putting dollar signs in
front of the cell row and column references ex. $B$3 this will mean that no matter where you copy that cell to it will always
refer to cell B3. For scenario 2, change the reserve requirement to 40%.

6.

Create a third page of the excel spreadsheet and label it GDP. Enter in the data given below for 2012 U.S. expenditure numbers
and then create a pie chart with percentages. (Under Insert then click pie. When the graph comes up click Chart Tools, Design,
Quick Layout and
select a pie chart with percentages. Create your own
Consumption Expenditures
10362.3 selections for each piece of the pie and put a
personal color
Investment Expenditures
1763.8 the percentages.) Make sure to title your chart: GDP
background color on
Government Expenditures
2974.7
2012 U.S.
Net Exports
-499.4

7.

7.

Begin in equilibrium in each of the following graphs; draw the effects from question 2 above as they would apply in each graph
below. Next draw the effects of an anti-inflationary policy taken by the fed to correct the result from question 2 - use all three
graphs (Money Supply and Money Demand, AD/AS, and PAE). Explain what is happening in each graph and overall in the
economy as the due to the anti-inflationary policy. (20 pts)
Money Supply and Money Demand Graph
Nominal
Interest Rate
Aggregate
Demand and
Aggregate Supply

Money Supply Curve (MS)

PL

i
i

Real GDP

ms

ms

AS

AD

Money Demand (MD)

PAE

PAE

PAE = YAE
AE

45
Y

When the Feds implement an anti-inflationary policy they plan to reduce the demand for money. This happens when
they do an Open Market Sale. This encourages the people to buy bonds from the fed which reduces the amount of money in
the bank. Thus decreasing the supply of money, causing interest rates to increase. As interest rates increase investments slow
down and hiring wages will lower. This is being shown on the Money supply graph, as the interest rate goes down there is a

greater demand for money, and also on the aggregate demand graph, shows the demand for money decreasing due to the
change in price level, represented by the aggregate demand line shifting left on the graph.
On the PAE graph, the aggregate expenditure line moves up to AE, this means the amount of money people are
spending is directly related to the amount they are paying in interest, and what the demand for money is. In this case, the
demand for money is decreasing, and the overall aggregate expenditure increases to AE.