Government budget balance 11 a central banks discount

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Government budget balance 11. A central bank’s discount rate at which lender of last resort operations are conducted is usually: above the official interest rate 12. The term Quantitive Easing is usually used to describe: a large increase in M0 when interest rates are already or close to 0. 13. Price stability is typically interpreted as 2-3% inflation 14. The central bank of Z operates via a Taylor rule of: Interest rate=inflation target+equilibrium real interest rate+0.5*output gap+0.5*(inflation-inflation target) The inflation target for Z is 3% and the equilibrium real interest rate is 3%. If Z has an output gap of -1% and inflaion currently 2%. What
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interest rate should be targeted? 4% (as interest rate is 5% and it should be below the answer) CH14 1. SInce 20’s most developed countries have experienced a substantial increase in government expenditures as a share of GDP. TRUE 2. Unemployment benefit is an example of a government transfer payment. TRUE 3. Interest payments on outstanding debt is the largest element of government spending for most countries. FALSE 4. A publicly funded police force is an example of a “public good”. TRUE 5. Property taxes from the largest source of government tax revenue. FALSE 6. Which of the following is not an implication of the Laffer curve? Maximum tax revenue is the goal of government policy. 7. In an economy is Pareto efficient, this implies that: no one can be made better off by reallocating existing resources without making someone else worse off 8. A government finances road building program is an example of: government investment 9. Suppose the government doubles income tax, the distortionary loss to society caused by the tax will: increase by more than double 10. The key characteristics of a public good is that it is: non- excludable in the sense that it is hard to exclude someone from enjoying the benefits 11. WHich of the following is an example of a paternalistic government action? Government subsidization of education to increase enrolment. 12. Suppose tax rates are currently 70%. If tax rates are cut: tax collections may rise but only if the country is currently on the downward sloping portion of its Laffer curve . 13. The government debt to GDP ratio is defined as: government outstanding debt/ nominal GDP 14. Imagine an economy that can choose between a) setting taxes at 10% on year 1 and 20% in year 2 or b) setting taxes at 15% in both year 1&2. WHich of the following is true? The total distortion over 2 years together is greater in case a) than in case b) 15. Tax-smoothing arguments hold that: tax changes should be kept relatively small to avoid economic distortions.
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