1. Suppose that inflation is 2%, the Federal funds rate is 4%, and inflation rises 3%. According to the Taylor Rule, what should the Federal Funds target rate be?

5.5%

4%

5%

3.5%

2. The government wants to enact discretionary fiscal policy to reduce inflation. Which of the following will shift the AD curve to the left?

Sending stimulus payments directly to households.

Decreasing government spending on education.

Decreasing household income taxes.

A decrease in stock market investments.

3. If the Federal Government collects $5 trillion in tax revenue and spends $7 trillion, then they have $2 trillion in deficit spending and increased the debt by $2 trillion.

False, saying this is both debt and deficit is double counting.

True, deficit spending is in the current year, while the overall debt also increases by the same amount

True, the revenue is divided evenly between the debt and deficit.

False, only the debt increases, but the deficit spending remains the same.