13-16 Macroeconomics questions

QUESTION 13 The central bank and the government are working against each other if, as the government cuts taxes the central bank lowers the federal funds rate lowers the discount rate increases the money supply sells government bonds decreases the legal reserve requirements QUESTION 14 "The FED, in its latest meeting of December, raised short-term interest rates 75 basis points, which was 50 basis points higher than what traders expected. As a result, the prices on 30- and 90-day government debt fell, while the market in longer, 2- to 5-year government paper bonds, rallied." REMARK: 1 basis point = .01%, so 75 basis points is .75% Suppose that after the meeting, the annual yield on medium-term (2 to 5 year) government debt changed by 125 basis points. This suggests: Medium-term inflationary expectations fell by 1.25 percentage points. Medium-term (2-5 year) inflationary expectations rose by 1.25 percentage points. Medium-term inflationary expectations rose by 1/2 percentage points. Medium-term inflationary expectations fell by 12 percentage points. QUESTION 15 The figure above shows New Zealand's net exports (trade balance) and current account balance as percentages of New Zealand's GDP over the period 1972-2007. The figure above shows that, for most of the years since 1972, New Zealand's current account balance was in _ _ to finance this, New Zealand must have relied on It follows that have played a key role in financing domestic investment and capital formation in New Zealand. deficit; net capital inflows; net exports deficit; net capital inflows; international aid and gifts deficit; net capital inflows; foreign saving deficit; net capital outflows; foreign saving surplus; net capital inflows; net factor income QUESTION 16 In a closed economy, greater government borrowing can crowd out some forms of household and business by_, thereby limiting the impact the fiscal stimulus spending may have on the economy. In an open economy, however, the greater demand for capital is met from higher interest rates: higher exports higher interest rates; foreign financing higher taxes: higher exports higher taxes; foreign financing