Economics help.

Hey all,

I've got a big economics final coming up. I've been looking through my notes and at the study guide and I have a few questions. Obviously i'm not here saying, "please do this for me." But I would just like some guidance from anyone who may be knowledgeable in the field. Like I said, this is just for the study guide anyway, so a direct answer probably wouldnt even get me the grade unless I can study it and understand it. I've never missed a single class this semester for the economics class (it's macro, by the way) and I'm still just lost. Anyway, now that the lengthy intro is out of the way, here are my questions:

I've got the functions of banks listed as 'lending money, holding money, protecting held money, etc.' but i'm supposed to understand that there is a contradiction here. I'm not seeing one, unless my functions are incorrect.

Also, on the United States dollar, it says, "this note is legal tender for all debts public and private". When in a daily situation would currency not be a liable source to repay a debt? And the answer isn't metaphysical or metaphorical.

Thanks for any help at all!!! Help an ATSer out!

I don't know that I can be much help on this, but.....

Money has no value.
It is only a promise from the government that issues the currency that it can be exchanged for goods and services.

Corn has value.
Skills you provide have value.

Banks and money are just a fragile system to run an economy that is based on the false assumption that you have some security. You don't.

The best use you could make of the banking system is to rent a box in their safe and keep something of real value such as metals that can be traded for other goods.

"this note is legal tender for all debts public and private" is only as good as the government that issued it.
Governments fail, and nations fall....

Okay, so I understand that now. Thank you!

I have discovered that the contradictions in banks lies within its ability to create and receive money, but sometimes it doesnt receive money, like when loans arent paid back. But what would resolve this? Would it only be something permanent or temporary?

Ok, heres what i'm stuck on at the moment. I know nobody can put graphs up, but if anyone can help me understand even one of these a little bit better it would mean so much to me!

1. A friend argues that a stimulative fiscal policy will end up causing inflation and crowding out, without adding much other benefit to the economy. You think you have a more sophisticated argument that favors some government spending.

A) Explain, verbally and with the appropriate graphs, your friend's view, showing how she may be correct. (In other words, why might inflation and/or crowding out occur?)

B) Explain, verbally and with the appropriate graphs, your more sophisticated view. (In other words, why might inflation and/or crowding out NOT occur, and why might economic growth result?)

2. A. The newspaper editors argue that the federal reserve should increase in the money supply to stimulate the economy, eventually shifting Aggregate Demand. Assuming the world works the way the editors want it to, carefully explain how the Fed does it, making sure to discuss the role of banks. Show graphically (though without numbers) how it should work.

B. A TV analyst enters the conversation and says, "I hate to divulge a big secret, but we are really unable to control the money supply much at all, especially if we try to reduce it." Carefully explain, using prose and graphs, why she is correct, and what it implies about the shape of the money supply curve.

3. Derive the Aggregate demand curve. In your derivation, carefully explain where the terms in aggregate demand come from.