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He also argues that if you have large budget deficits, you must have a large debt. In what ways is your study partner correct and in what ways is he incorrect?
Calculate both the change in government purchases of goods and services and the change in government transfers necessary to close the gap.
Most macroeconomists believe it is a good thing that taxes act as automatic stabilizers and lower the size. How can you explain this apparent inconsistency?
The government's budget surplus in Macroland has risen consistently over the past five years. Can you determine which policy maker is correct? If not, why not?
How will the money supply change if the required reserve ratio falls to 5%? How will the money supply change if the required reserve ratio rises to 25%?
By how much will the money supply in the economy contract in response to Ryan's withdrawal of $400?
How does the deposit initially change the T-account of the local bank? How does it change the money supply?
Calculate the dollar cost of the annual interest on the government's total debt assuming the interest rate and debt figures cited above.
The town of Ithaca, New York, prints its own currency, the Ithaca HOURS, which can be used to purchase local goods and services.
Checkable bank deposits = $500 million Traveler's checks = $10 million. Are the commercial banks holding excess reserves?
What will happen to the money supply under the following circumstances in a checkable-deposits-only system?
By how much will the money supply change? Show the final changes to the T-account for the commercial banks when the money supply changes by this amount.
Why do U.S. taxpayers lose because of North Korea's counterfeiting? What is the amount of money U.S. taxpayers are losing per year because of these $45 million?
Why would low policy rates suggest low long-term interest rates? What might have caused long-term interest rates to rise in late 2010?
What is the target federal funds rate? Does the statement comment on current macroeconomic conditions in the United States?
How will the following events affect the demand for money? In each case, specify whether there is a shift of demand curve or a movement along the demand curve.
Go to the website of your favorite bank. What is the interest rate for six-month CDs? Why are rates for six-month CDs higher than for 26-week Treasury bills?
What are the interest rates on 2-year and 10-year notes? How do the interest rates on the 2-year and 10-year notes relate to each other?
How did or would the following affect the current public debt and implicit liabilities of the U.S. government?
In which of the following cases does the size of the government's debt and the size of the budget deficit indicate potential problems for the economy?
At this rate, for how many years will the proven oil reserves last? Discuss the Malthusian view in the context of the number you just calculated.
What is the level of investment spending and private savings, and what is the budget balance? What is the relationship among the three?
What is the budget balance (as a percentage of GDP) in both countries? Are Capsland and Marsalia running a budget deficit or surplus?
Why would you expect real GDP per capita in California and Pennsylvania to exhibit. What changes would allow California and Baja California to converge?