Question

1. Outright purchases by the Fed take place typically whenever: (a) a change in the Treasury bill target rate must be enforced; (b) the dollar is too weak relative to other major currencies (such as yen and euro); (c) a permanent injection of reserves is needed; (d) repo transactions by the desk at the New York Fed must be offset.

2. A short-hand measure of real, sustainable economic growth includes which of the following: (a) growth in productivity plus growth in the labor force; (b) growth in government spending plus growth in the monetary base; (c) expansion in the most cyclically-sensitive components of nominal GDP; (d) expansion of the size of the structurally unemployed workforce.

3. Which of the following would be expected to stimulate the economy the LEAST over the near term? (a) reducing tax rates on the highest-income taxpayers; (b) funds spent on the space program; (c) funds spent on school lunch programs; (d) higher wages for government workers.

4. According to trade theory, an increase in government purchases or a decrease in taxes shrinks national savings, shifts to aggregate saving schedule to the left and results in: (a) a rise in Tobin’s “q;” (b) an immediate decline in the fiscal deficit; (c) a balance of payments surplus; (d) a larger trade deficit.

Answer 1

Outright purchases by the Fed take place typically whenever--(d)repo transactions by the desk at the New York Fed must be offset.

A short-hand measure of real,sustainable economic growth includes--(c)expansion in the most cyclically-sensitive components of nominal GDP.

(a)Reducing tax rates on the highest income taxpayers would be expected to stimulate the economy the LEAST over the near term.

According to trade theory,an increase in government purchase or a decrease in taxes shrinks national savings,shift to aggregate saving schedule to the left and results in--(c)a balance of payment surplus.