Please provide answers for 5,6,7 & 8 Please provide details & charts with references, Thank You

Question 5. (10 points) Checkpoint Question 26-1-4.

Explain the role of government in a financial system.

Question 6. (10 points)

Explain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment? Saving? Explain.

a. Your family takes out a mortgage and buys a new house.

b. You use your $200 paycheck to buy stock in AT&T.

c. Your roommate earns $100 and deposits it in his account at a bank.

d. You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.

Question 7. (10 points)

Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 trillion, and public saving is $0.2 trillion. Assuming this economy is closed, calculate consumption, government purchases, national saving, and investment.

Question 8. (20 points) Suppose that the T-account for First California Bank is as follows.

• If the Fed requires banks to hold 10 percent of deposits as reserves, how much in excess reserves does First California now hold?
• Assume that all other banks hold only the required amount of reserves.If the Fed sells $40,000 Treasury bond to First California, what is the amount of reserves in the T-account of First California after the purchase of the Treasury bond?As a result of the Fed’s selling $40,000 Treasury bond, by how much would the economy’s money supply change?Is the change upward or downward direction?

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