Macro_General - 1 a) Expansionary, Buying T-Bills b)...

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1 – a) Expansionary, Buying T-Bills b) Expansionary, Selling T-Bills c) Contractionary, Selling T-Bills d) Contractionary, Buying T-Bills 2 - What would happen to the inflation rate if the FED were to use its policy tools? a) 5% b) 7% c) Higher than 5% d) Lower than 5% e) Higher than 7% 3 - What is the highest inflation rate observed between 1952 and 2005? a) Late 60s b) Early 70s c) 1930s d) Early 80s 4 - a) 3 % b) 6.5% c) 550 basis points d) 650 basis points e) Both b and d 5 – The Policy Action Shown Above can be a) Fiscal policy, lowering taxes b) Monetary Policy, decreasing government expenditures c) Monetary Policy, lowering reserve requirement ratio d) Fiscal Policy, increasing taxes 6 – What is the price of a 5 year T-Bond, with a par value of 1000, with the annual interest rate of 10% (semi- annual compounding) (approximately) a) 614 b) 815 c) 930 d) Your answer________ 7 – How does the independence of a central bank effect the average inflation rate in a country? (Other factors held constant) a) does not really matter b) higher inflation rate c) lower inflation rate d) both higher and lower depending on the governments actions, so it depends… 8 – If the tax multiplier is -2, what happens to GDP if there is a $10 million increase in taxes? a) GDP increases, by $ 5 Million 1
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b) GDP increases, by $ 20 Million c) GDP decreases, by $ 5 Million d) GDP decreases, by $ 20 Million 9) Assume that the Government has increased its expenditures, and the graph below shows the effects of this increase. The AD Curve shifts back to left again, after it reaches the equilibrium level of 12.4 Trillion Dollar GDP. The reason of moving from point B to C might be: a) Crowding Out Effect Affects Suppliers in a negative way, so AS shifts, as a response AD shifts b) Crowding Out Effect Affects Investment in a negative way, so AD shifts back c) Government Reduces Taxes d) FED conducts Open Market Operations (buy bonds) e) All of the above are correct 10 - What are the reasons that might result in the following graph, and what is the result? a)
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This note was uploaded on 02/26/2008 for the course ECO 001 taught by Professor Gunter during the Fall '06 term at Lehigh University .

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Macro_General - 1 a) Expansionary, Buying T-Bills b)...

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