An economy has fallen Into the liquidity trap and the central bank Is buying large amounts of government bonds and doing forward guidance. Consequently, the central bank Is A. doing Yield - Curve Control (YCC) polley B. doing Quantitative Easing (QE) C. monetizing the deficit D. combining YCC and QB E. Not enough information is supplied to provide an answer Questions 4 refers to the following information: Consider an economy such that at the beginning of this year the debt-income ratio is 80 per cent. The Treasury expects the following numerical values of the relevant economic indicators at the end of this year: Primary budget showing a deficit of 20 per cent of GDP; Nominal interest rate 2. 5 per cent, Inflation rate 5 per cent, and Real GDP growth 4 per cent, The change in the debt-income ratio is defined as Ab - b,41 - b, where b, is the debt - income ratio at the beginning of year t.The horizontal axis in Figure 1 measures the ratio of the primary budget to the nominal income: PB The vertical axis In Figure 1 measures the difference between the real rate of interest and the growth rate of real income: B=r-p Quadrant I 1141 Qualitatively Unambiguous Case 2 Ab - 0 Sign of Ab Deficit Surplus Sign of Ab Ab co Qualitatively Unambiguous Case 1 Quadrant Ill Quadrant II Figure 1 Question 4 From the preceding information, it follows that A. The debt-income ratio will decrease B. The economy is on the steady-state path C. The debt-income ratio will remain constant D. The debt-income ratio will increase Not enough information is supplied to provide an answerQuestions 5 and 6 refer to the Solow Growth Model. The hypothetical economy Is described by y = f(k) = 2 x vk - Production function per worker s = 0.50 - Saving rate Question 5 If the depreciation rate for this economy is 6 = 0.25 - Depreciation rate then, the steady-state level of capital per worker is A. 12.00 B. 16.00 C. 20.00 D. 24.00 E. 28.00 Question 6 Assume a ceteris paribus reduction in the depreciation rate to 8 = 0.20 - Depreciation rate Which of the following is the value of the steady-state level of consumption per worker? A. 3.00 B. 5.00 C. 7.00 D. 9.00 E. 11.00