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- How can a federal budget deficit increase market equilibrium interest rates and reduce private investment and future economic growth?Interest payments on federal government bonds which are owned by the central bank 1, are recorded as central bank profits and then paid to the government as dividends. 2, are recorded as central bank profits and paid out to the private investors who own the central bank. 3, necessitate an increase in taxation so that they can be funded. 4, lead to a decrease in the money suppy.Choose the correct answer 1.) Which of the following measures would result in an increase in the money supply in the economy? [S1] Sale of government securities to the public by the central bank. [S2] Increase in the expenditure by the government. [S3] Reduction in tax collection by the government. [S4] Purchase of government securities from the public by the central bank. A.) Statement 3 only. B.) Statements 2 and 4 only C.) Statements 1 and 3 only. D.) Statements 2, 3 and 4. 2.) The currency notes in circulation as well as the proportion of the total money supply held in the form of currency are influenced by which of the following? [S1] The trade volume in the economy [S2] The level of prices in the economy [S3] The development of banks and banking habits of the people A.) Statements 1 and 2 only B.) Statements 2 and 3 only C.) Statements 1, 2 and 3 D.) Statement 3 only 3.) What is the most likely effect of financial innovation and increasing real GDP, respectively, on the demand…
- 18 The following are the monetary policy tools EXCEPT:* A. buying and selling of short-term sukuk B. change the interest rates C. change the reserve requirements D. change in government spending and tax rates1) Fiscal policy refers to a) making changes in private expenditures as a result of changes in government spending. b) making changes in the quantity of money to achieve particular economic goals. c) efforts to balance a government's budget. d) making changes to government budgets to achieve particular economic goals. 2) The economy suffers a positive supply shock. As a result, in the short run Real GDP will and the price level will a) fall; fall b) fall; rise c) fall; remain constant d) rise; fall 3) A change in Real GDP in the short run can be brought about by a change in a) labor productivity. b) wealth. c) All of the options available d) the exchange rate. 4) An expansionary fiscal policy will a) never result in a budget surplus. b) always result in a budget deficit. c) sometimes result in a budget deficit. d) always result in a budget surplus.No Plagirism Please! 20.Analyze the relationship between the federal budget and national debt. Explain how a federal budget deficit and a federal budget surplus influence levels of national debt. 22.Compare and contrast the federal funds rate, the discount rate, and the prime rate.
- 3. Trace the implications of a government budget surplus on the following:a. national savingb. interest ratesc. private investmentd. economic growthe. future living standards When tracing the effects of the budget surplus, list the assumptions you are making.An increase in marginal tax rates would likely have the effect of □ a. increasing; increasing b. decreasing; decreasing O c. decreasing; increasing O d. increasing; decreasing the demand for municipal bonds and the demand for U.S. government bonds.In case government increases government spending and Central Bank conducts expansionary monetary policy, what is the impact on interest rate and output?
- What is a federal budget deficit or surplus? How does this affectinterest rates?Which of the following Federal Reserve actions could lead to an appreciation of the U.S. dollar? Select one : (1)An increase in the monetary base (2)A discount rate decrease (3) A required reserve ratio reduction (4)A sale of government bonds (5)A purchase of government bondsBriefly explain whether each of the following statements is true or false. 1. An increase in government expenditure financed by borrowing (running a larger budget deficit) necessarily leads GDP to rise by more than the increase in gov- ernment expenditure according to the IS-LM model.
