Q1. Analyze the following statement, and illustrate how would happen in the long run if such advice were followed by the Fed: "The increase in the stock market has increased person's wealth. As a result, their consumption has increased demand and output. So the Fed needs to increase supply of money because with higher income people's demand for real money balances will be higher." Draw and label the graphs.

Q2. Explicate how firms decide on where to produce depending on the marginal product and average product.