Thursday
July 31, 2014

Homework Help: Econ

Posted by Anonymous on Thursday, May 10, 2007 at 3:03pm.

- Explain the statement" The most unlikely problem of the national debt is that the government will go bankrupt."

- Consider the statement: "Our Grandchildren may not suffer the entire burden of a federal deficit." (What is this like a trick question?) Is this true or false?

- Distinguish M1, M2, and M3. What are near monies?

- If you deposit a 20,000 dollar check into a checking account and your bank has a three percent reserve requirement, by houw much will the bank's excess rise? Consider the money multiplier. What is the maximum increase in money supply?

Do a little research, then take a shot. What do you think.
hint 1: what can (federal) governments do than ordinary citizens cannot do? And who imposes sanctions on people who default on their loans.
hint 2: is there government spending that benefits people now as well as in the future.

I already assessed the first question. Although I would appreciate some assistance on the second and third one. No matter what I research the questions myself all I'm really looking for is a point in the right direction.

Thanks

Q2 There is a notion of deficit spending that benefits of the money spent today go entirely to the current generation; however future generations get stuck with the bill.

However, one could argue that some spending done today makes the future look brighter. For example, money spent on infrastructure such as highways leads to economic growth which leads to a more prosperous existence for future generations. Also, are we a rich prosperous nation today because of the huge deficit spending made in WWII.

Q3) Wikipedia has a brief but probably adequate description. Google Money Supply Definitions.

Q4) With a 20K deposit, the bank needs to keep 3% ($600) in reserve. Excess reserves, which it can loan out is the rest. The money multiplier (which gives the maximum expansion) is 1/rr = 1/.03 = 33.333

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