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Answer all four questions:

1. Discuss the concept of the macro economy. How do we define the total value of economic output and how can it be measured. What are the major performance goals that we set for the economy and how do we measure the performance? Discuss the concept of macro economic equilibrium in terms of injections and withdrawals from the circular flow of wealth and in terms of aggregate demand and aggregate supply.

2. Discuss the concept of fiscal policy and problems that may arise. Describe what it is and how it works.

3. Discuss monetary policy. Describe the monetary system of the United States including how it is flexible in relation to economic conditions and how the Federal Reserve System can change the supply of money. Discuss how the supply of money impacts on the economy.

4. Define and discuss the concept of comparative advantage. How does this concept "prove" the advantages of free trade to both countries involved in a transaction? Are there economically justified reasons to restrict free trade? Explain.

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Macroeconomics, Concept of fiscal policy, monetary system of the U.S. are encompassed.

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