1. Consider the economic situation in the U.S since 2008 and discuss how supply side and demand side economic may be used to solve the current problems. Also, explain why you believe that these two approaches may or may not work.

2. Provide a numerical example and show how a small deposit at a commercial bank can create a multiple of that of money supply. Explain the role of all parties involved in this process.
3. The Federal Reserve chairperson announced the latest monetary policy on Wednesday, December 12, 2012. Explain what the new policy is and whether it will help (impact) to reduce unemployment substantially and increase economic growth. Explain your answer.
4. Supposed the federal government spends an additional one trillion dollars next year. if the marginal propensity to consume is 0.8: what is the change in GNP? What additional marginal tax rate is needed for the government to collect additional taxes to pay for the additional $ one trillion of expenditures?

1. To discuss how supply-side and demand-side economics can be used to solve the current economic problems in the U.S. since 2008, we first need to understand the basics of these two approaches.

Supply-side economics focuses on stimulating economic growth by promoting investments, reducing regulations, and lowering taxes on businesses and individuals. The theory is that by improving the conditions for production, businesses will respond by increasing their output and creating jobs. This approach aims to increase the supply of goods and services in the economy.

On the other hand, demand-side economics aims to stimulate economic growth through increased consumer spending. This can be achieved by implementing policies such as tax cuts for individuals, increasing government spending on public infrastructure projects, and providing benefits to those in need. The idea behind demand-side economics is that boosting consumer spending will create more demand for goods and services, prompting businesses to increase production and hire more workers.

Now, discussing whether these two approaches may or may not work depends on various factors and different points of view. Some arguments in favor of supply-side economics suggest that reducing taxes on businesses can encourage investment, job creation, and economic growth. Supporters argue that the resulting increase in production and employment will benefit the economy in the long run.

On the other hand, critics of supply-side economics argue that it primarily benefits the wealthy and may exacerbate income inequality. They argue that tax cuts for the rich may not necessarily trickle down to benefit the broader population. Additionally, reducing regulations may lead to negative externalities, such as environmental damage or unsafe working conditions.

When it comes to demand-side economics, proponents argue that stimulating consumer spending can lead to an immediate boost in economic activity, creating jobs and promoting growth. They believe that putting money in the hands of consumers who are more likely to spend it will have a positive multiplier effect on the economy.

However, critics of demand-side economics argue that it can lead to increased government debt and deficits if not properly managed. They contend that excessive government spending may crowd out private investment and lead to inflationary pressures.

Ultimately, the effectiveness of these approaches depends on the specific economic conditions and the implementation of policies. Both supply-side and demand-side economics have their strengths and weaknesses, and a balanced approach that takes into account the specific circumstances may be the most effective way to address the current economic problems in the U.S.

2. To understand how a small deposit at a commercial bank can create a multiple of money supply, we need to consider the concept of fractional reserve banking.

Fractional reserve banking is a banking system in which banks are required to keep a fraction of their total deposits as reserves, while lending out the rest. This effectively creates new money in the economy.

Let's illustrate this with a numerical example:

Suppose you deposit $1000 in a commercial bank. The bank is required to keep a fraction of this deposit as reserves, let's say 10%. This means that the bank can lend out the remaining 90% ($900) to borrowers.

Now, the borrower who receives the $900 loan deposits it in another bank. Again, this bank keeps 10% as reserves and lends out the remaining 90%, which equals $810.

This process continues as subsequent loans are made and deposited into other banks. Each time, the bank keeps a fraction as reserves and lends out the rest. This creates a multiplier effect on the money supply.

To calculate the total money supply created by the initial $1000 deposit, we can use the formula for the money multiplier:

Money Multiplier = 1 / Reserve Requirement

In this case, the reserve requirement is 10%, so the money multiplier would be 1 / 0.1 = 10.

Therefore, the total money supply that can be created from the initial $1000 deposit is $1000 x 10 = $10,000.

In this process, the role of the commercial banks is to receive deposits from individuals, keep a fraction as reserves, and lend out the remaining amount. This creates new money in the economy through the multiplier effect.

The borrowers, on the other hand, play a role in expanding the money supply by taking loans from the banks and spending the borrowed money.

3. To answer this question, it is necessary to clarify that the date mentioned in the question (Wednesday, December 12, 2012) is not correct as it falls in the past and does not correspond to any actual event. Also, without knowing the specific details of the monetary policy announced, it would be impossible to provide an accurate explanation of its potential impact on reducing unemployment and increasing economic growth.