Question

Question 9

1. In the context of the circular flow, the condition, S > I, implies:

   	a.	macro equilibrium.
   	b.	a spending excess that will produce rising inventories.
   	c.	a spending shortfall that will produce rising inventories.
   	d.	a required reserve shortfall.

Question 10

1. The fed funds market is a market:

   	a.	that is not affected by the Fed’s open market operations.
   	b.	in which a bank may borrow excess reserves overnight from another bank in order to cover a required reserve shortfall.
   	c.	in which the Fed’s discount rate of interest is determined.
   	d.	in which the U.S. Treasury sells U.S. government bonds.

Question 28

1. Whereas (Mandatory/automatic, discretionary, deficit or investment) spending refers to the portion of the federal budget that goes through the annual appropriations process each year, (Mandatory/automatic, discretionary, deficit or investment)spending (like spending for Social Security) is not part of the annual appropriations process.

Answer 1

Q9) option C)

As saving exceeds investment, so spending is less than desirable level, so unsold stock will pile up

Macro eqm is when S = I, so a is false

Spending excess will result in running down of inventories, b is false .

D has no link with the question

Q10) option b)

In Federal funds market , banks borrow overnight funds, to cover for their reserves shortfall

Open market operations determine the federal funds interest rate, ( rate at which banks borrow from each other) , thus fed funds market is affected by OMO, a is false.

C is false, bcoz federal funds rate is determined.

Q28)

first blank, discretionary

second blank , automatic