2004PRELIM1_ANS - s PART II ESSAY#1 1 Budget Deficit =...

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Sheet1 Page 1 2004 prelim1 Answers 1. A 2. C 3. D 4. B 5. D 6. A OR B 7. A 8. C 9. B 10. B 11. B 12. C 13. C 14. B 15. D 16. C 17. A 18. fall 19. $20,000 20. C 22. One example is fixed income earners. For instance, the elderly who receive a fixed pension every month and hence inflati 23. The expansionary tools of the government have limits. Not only output will not grow forever due to productive limitations, b 24. No. An initial increase in money supply of 50 million dollars will have a larger effect on the total final supply of money due 25. False. Banks actually create money by making loans out of its excess reserves. These loans are the reason why an increa
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Unformatted text preview: s PART II ESSAY#1 1. Budget Deficit = Government Expenditures - Taxes 2. Keeping the budget deficit low will imply cutting on government expenditures and/or raising taxes. Both actions reduce agg r e 3. SEE SHEET ESSAY #2 1. GDP= C+I+G+(EX-IM) -Exports to China have increased-Investment has increased due to business cycles Inflationary monetary policies that favor borrowers (Japanese firms) has also freed up investment since firms have to pay bac k 2. SEE SHEET 21. No. Buying used goods do not help raise todayhs GDP, since GDP accounts only for goods produced this year using facto...
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