12. During the 2007-09 period, consumer and business confidence in the economy declined dramatically, and crude oil prices rose substantially. Use the graphical AD/AS model of the aggregate economy to show, and explain, the likely effects of each of these two forces on the inflation rate and on real GDP. What was the likely net effect of the combined forces on inflation and output.
13. How do open market purchases by the Federal Reserve affect the quantity of bank reserves and the federal funds interest rate? Use the graphical model of the market for bank reserves to show and explain the effect on the fed funds rate.
14. How did the recent turmoil in financial markets likely affect the performance of the overall economy,
especially the behavior of the inflation rate and real GDP
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