Directions: Be sure to save an electronic copy of your

  

Directions: Be sure to save an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English, spelling and grammar. Sources must be cited in APA format. Your response should be four (4) double-spaced pages; refer to the “Assignment Format” page located on the Course Home page for specific format requirements.

Part A 

1. Why is the money multiplier in the United States smaller than the inverse of the required reserve ratio? Provide one (1) reason.

2. Explain why depositing cash into a checking account does not change the money supply. Provide one (1) supporting fact.

3. Explain why the money supply does not change when one individual writes a check to another. Provide one (1) supporting fact.

Part B 

1. Describe one (1) reason why the flexibility of wages and prices tend to favor the Keynesian economic view in the short run and one (1) reason why the flexibility of wages and prices tend to favor the classical economic view in the long run.

2. Refer the figure below and explain what happens in each graph (A, B, and C) when an economy is moving from a recession (point a) back to full employment.

 

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