A government surplus has the effect of :

A government surplus has the effect of :
 a. Increasing the demand for real loanable funds, increasing the real risk-free interest rate, and increasing the quantity supplied of real loanable funds per period.
  b. Increasing the supply of real loanable funds, reducing the real risk-free interest rate, and increasing the demand for real loanable funds.
  c. Decreasing the supply of real loanable funds, increasing the real risk-free interest rate, and decreasing the quantity demanded of real loanable funds per period.
  d. Decreasing the supply of real loanable funds, increasing the real risk-free interest rate, and decreasing the demand for real loanable funds per period.
  e. Increasing the supply of real loanable funds, reducing the real risk-free interest rate, and increasing the quantity demanded of real loanable funds per period.

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Question 2 - Other things remaining the same, a decrease in the real return on bonds causes the velocity of money to:
 a. Rise.
  b. Fall.
  c. Not change.

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Question 3 - Government surpluses are generally considered to be:
 a. Expansionary, but they have secondary effects through the foreign exchange market that are contractionary because they tend to raise the value of the domestic currency.
  b. Expansionary, but they have secondary effects through the real loanable funds market that are contractionary because they reduce the real risk-free interest rate.
  c. Contractionary, but they have mild secondary effects through the real loanable funds market that are expansionary because they reduce the real risk-free interest rate.
  d. Contractionary because they have primary and secondary effects that are contractionary.

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Question 4 - Other things remaining the same, a decrease in inflationary expectations causes the velocity of money to:
 a. Rise.
  b. Fall.
  c. Not change.

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Question 5 - Suppose a nation reduced taxes by 20 billion. The direct change in the monetary base would be:
 a. Equal to +20 billion because the government pumps new money into the economy when it lowers taxes.
  b. Greater than +20 billion because the M2 money multiplier would inflate the 20 billion of new monetary base.
  c. Equal to 0.
  d. Equal to 20 billion times the reserve ratio on checking accounts.
  e. Less than 20 billion because some of the newly created funds would leak into the system in the form of currency in circulation.