Thank you and please answer all

1.

The value of bonds outstanding

A.

is independent of the government running either a budget deficit or a budget surplus.

B.

changes only when the government runs a budget deficit or surplus if the federal debt is zero.

C.

increases when the government runs a budget deficit and decreases when the government runs a budget surplus.

D.

decreases when the government runs a budget deficit and increases when the government runs a budget surplus.

2.Economists who are concerned with the effect of fiscal policy on the ability of households and firms to borrow to finance consumption will focus on ________, and economists who want to know whether the government's fiscal policy is sustainable will focus on ________.

A.

the federal debt; both the federal debt and yearly budget deficits

B.

the federal debt; yearly budget deficits

C.

yearly budget deficits; the federal debt

D.

yearly budget deficits; both the federal debt and yearly budget deficits

3.

When the nominal interest rate is constant, ________ in the growth rate of the money supply ________ the inflation rate, and ________ the debttoGDP

ratio.

A.

a decrease; decreases; increases

B.

an increase; decreases; increases

C.

a decrease; decreases; decreases

D.

an increase; increases; increases

4.

In March 2012, Spain announced budget cuts of 27

billion in an effort to reduce its budget deficit. A CNN article quotes Treasury Minister Cristobal Montoro: "We are in a critical situation. This is the most austere budget in our democracy." The budget proposal included spending cuts for government agencies, infrastructure, defense, and education, as well as reduced aid for immigrants. The proposal also included increases in business taxes and a salary freeze and extended work hours for civil servants.

Source: Al Goodman, "Spain Announces 27 Billion Euros in Budget Cuts," CNN,

March 30, 2012.

The likely effect of these actions will be to

not affect

decrease

increase

saving,

not affect

increase

decrease

investment, and

lower

raise

not affect

the real interest rate.

In what ways are the short-run and long-run effects of this deficit reduction likely to differ?

A.

In the short-run both saving and investment are likely to fall while the impact on the real interest rate hinges on the response of the central bank.

B.

The short-run effects will be the same as the long-run effects, but smaller in magnitude.

C.

The short-run effects will be the exact opposite of the long-run effects.

D.

The effects in the short-run are indeterminate.

5.

Federal government expenditures on goods and services $455 million

Transfer payments $85 million

Tax revenue $405 million

Interest payment on existing debt $60 million

Seigniorage $10 million

Newlyissued government bonds $185 million

The data in the table represents budget figures for the nation of Arugula for 2011.

Refer to Table 13.1. The primary budget deficit for Arugula in 2011 is

A.

$135 million.

B.

$195 million.

C.

$380 million.

D.

$600 million.

6.

When the central bank increases the monetary base, the purchasing power of previously existing currency ________, and this essentially transfers wealth ________.

A.

decreases; from the government to those who own existing currency

B.

increases; from those who own existing currency to the government

C.

increases; from the government to those who own existing currency

D.

decreases; from those who own existing currency to the government

7.

What is the difference between gross federal debt and gross federal debt held by the public?

A.

Gross federal debt held by the public is essentially the total dollar value of outstanding Treasury bonds while gross federal debt includes only those bonds held outside the federal government.

B.

Gross federal debt is the total dollar value of all currency and bonds issued by the U.S. government while gross federal debt held by the public includes only the currency and bonds held outside the federal government.

C.

Gross federal debt held by the public is essentially the total dollar value of outstanding Treasury bonds held by the American public while gross federal debt also includes those bonds held by foreigners.

D.

Gross federal debt is essentially the total dollar value of outstanding Treasury bonds while gross federal debt held by the public includes only those bonds held outside the federal government.

8.

If the federal government tries to make fiscal policy sustainable by increasing seigniorage, the economy would experience ________ and will result in ________ potential GDP.

A.

a decrease in the real interest rate; higher

B.

a decrease in the growth rate of the money supply; lower

C.

an increase in the growth rate of the money supply; higher

D.

an increase in inflation; lower

9.

Consider the following statement:

"The only way for a country with a budget deficit to have sustainable fiscal policy in the long run is to cut government spending."

Do you agree with this statement? Briefly explain.

A.

No, although spending cuts are part of a sustainable fiscal policy for a country with a deficit, other options include tax increases, moderate money supply increases, and economic growth.

B.

Yes, in the long run, tax increases are not suitable for sustainable fiscal policy because they impede economic growth.

C.

No, although spending cuts are part of a sustainable fiscal policy for a country with a deficit, other options include tax increases, moderate money supply decreases, and economic growth.

D.

Yes, in the long run, moderate changes in the money supply are not suitable for sustainable fiscal policy because they are not very effective