Question

13a.

If the central bank does not use accommodating monetary policy, a fiscal stimulus is likely to increase interest rates, which in turn, will cause planned investment to decrease. What is this situation called

The time-inconsistency effect

The counter-accommodation effect

The crowding out effect

The multiplier effect

b.

Without an adequate source of domestic saving, a country can invest by borrowing from abroad. In its international accounts, the borrowing will be reflected in a current account _______, balanced by a financial _______.

deficit; outflow

deficit; inflow

surplus; outflow

surplus; inflow

c.

Which of the following statements is true?

Reinvestment of undistributed corporate profits amounts to about 3 percent of U.S. GDP and constitutes the largest single component of government saving.

Reinvestment of undistributed corporate profits amounts to about 15 percent of U.S. GDP and constitutes the largest single component of government saving.

Reinvestment of undistributed corporate profits amounts to about 15 percent of U.S. GDP and constitutes the largest single component of private saving.

Reinvestment of undistributed corporate profits amounts to about 3 percent of U.S. GDP and constitutes the largest single component of private saving.

d.

Ways to finance investment include which of the following?

All of the statements are true.

Business saving

Saving from household income

Surplus in the government budget

e.

How would the government budget constraint be described?

As the process of reducing government spending and increasing taxes by enough to make the deficit sustainable

As a set of rules and decision-making procedures that adjust fiscal parameters over time to serve the goals of long-run stability and prosperity

As a proposal to ame4nd the U.S. Constitution in a way that would require the federal government to limit its spending each year to the amount of tax revenue that it receives

As the relationship between what a government purchases and its sources of funds.

Answer 1