Questions 1. In the last election, some candidates suggested that...

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1. In the last election, some candidates suggested that the government should provide a free college education to students. Using consumer and producer surplus show how this could cause a loss of total welfare for society.
2. Assume we are below the natural level of output. What policies would you recommend to move us to the natural level of GDP? Provide a detailed explanation on the options available.
3. Since the election, we have seen a rise in the stock market and some indications that companies may increase investment. Explain why even though there have been no actual policy changes that this might happen. What kind of impact will this have on the economy? Provide a detailed analysis.
4. We have seen that banks are holding large levels of excess reserves. They are much higher than ever before. Explain why they might be doing this and what is the danger of having those excess reserves.

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