Humza A. Naeem Block 3 Unit 8 Section Review 1. Monetary policy, the changing of the money supply and interest rates by the Federal Reserve, in order to attain national economic goals of price stability and economic growth is studied in detail. No, you cannot determine which policy is being used because the government of Macroland can have a budget surplus when they are using a contractionary fiscal policy or if the real GDP is rising. 2. I would respond by saying that the balanced-budget rules are proposed because the government is running a budget deficit. 3. a) No indication of a problem b) No indication of a problem c) May be some problems in the future 4. a) 4.5 trillion is the dollar cost of the annual interest on the government's total debt assuming the interest rate and debt figures. b) If the government operates on a balanced budget before interest payments are taken into account, the US GDP must grow at a rate of 5% to keep the debt-GDP ratio to remain unchanged. c) The total increase in national debt is 9.6 trillion. d) GDP must grow at a rate of 2.2% in order for the debt-GDP ratio to remain unchanged when the deficit in fiscal year 2008 is $200 billion.