Question $1$: Draw the demand and supply graph in the labor market to explain the poten$-$

tial e$$ects of minimum wage increases on employment levels. Use the same graph to discuss

situations where raising the minimum wage may not result in job losses.

Question $2$: Using a money market graph, demonstrate and explain what happens to the

value of money and the price level if: $[30$ points$]$

a$)$ the Fed sells bonds in open$-$market operations.

b$)$ during a recession, there is a decrease in the demand for money.

c$)$ the Fed increases the reserve ratio

Question $3$: Assuming all other things equal, explain what would happen to the U$.$S$.$ real

exchange rate and net export under each of the following circumstances?

a$)$ The U$.$S$.$ nominal exchange rate appreciates.

b$)$ The U$.$S$.$ domestic prices decrease.

c$)$ Prices in the rest of the world rise.

Question $4$: Using simultaneous equilibrium in loanable funds and foreign currency exchange

markets, demonstrate and explain what happens to France$$s real exchange rate if the French

government runs a budget surplus.

Question $5$: For each of the following events, draw an aggregate$-$demand$/$aggregate$-$supply

diagram and explain the short$-$run e$$ects on output and the price level in the U$.$S$.,$ assuming

policymakers take no action.

a$)$ The United States Geological Survey $($USGS$)$ identifies the largest continuous oil and gas

resource potential in Texas.

b$)$ The federal government raises income tax rates for individuals.

c$)$ An overseas economic boom encourages foreigners to purchase more U$.$S$.$ goods.

d$)$ The Coronavirus outbreak causes disruption in supply chain and manufacturing operations

worldwide.

e$)$ The Fed increases the discount rate.