If the federal budget goes from a budget deficit in Year 1 to a budget surplus in Year 2, does it follow that the federal government acted to raise taxes or cut government spending in Year 2?
What will be an ideal response?
Ques. 2If the federal budget has an actual budget surplus of 75 billion, but a cyclically adjusted budget surplus of 50 billion, then the economy must be above potential real GDP.
Indicate whether the statement is true or false
Ques. 3How does expansionary monetary policy affect net exports?
A) Expansionary monetary policy reduces exports and increases imports.
B) Expansionary monetary policy reduces exports and reduces imports.
C) Expansionary monetary policy increases exports and reduces imports.
D) Expansionary monetary policy increases exports and increases imports.
Ques. 4If the government finances an increase in government purchases with an increase in taxes, which of the following would you not expect to see?
A) an increase in the exchange rate B) a decrease in net exports
C) a decrease in the interest rate D) an increase in aggregate demand
Ques. 5If the Fed does not take into account the additional policy channels available in an open economy, then ________ when conducting contractionary monetary policy
A) it is likely to increase GDP too little and cause a recession
B) it is likely to decrease GDP too little and inflation will persist
C) it is likely to decrease GDP too much and cause a recession
D) it is likely to increase GDP too much and inflation will persist
Ques. 6The majority of the federal government debt is held by government agencies.
Indicate whether the statement is true or false
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