41. A high and rising level of long-term debt relative to short-term debt might signify that:...

41. A high and rising level of long-term debt relative to short-term debt might signify that: (a) inflation expectations are worsening; (b) monetary policy is too tight; (c) borrowers have confidence in the outlook for inflation and real economic growth; (d) major debt restructuring is imminent.

42. Normally, falling tax rates and rising government spending can be expected to: (a) dampen investment spending; (b) cause long-term interest rates to fall; (c) win legislative approval from the Federal Reserve; (d) create fiscal stimulus.

43. Fiscal policy involves all of the following, except: (a) the level and structure of taxes; (b) setting of the discount rate; (c) implementation of entitlement programs; (d) the level and structure of government spending.

44. Rising income and wealth disparity often results in: (a) immediately accelerating inflation; (b) rising average propensities to consume in most countries; (c) sharply rising increases in consumer nondurables sales; (d) a rise in unproductive investment.

Expert Solution

41. A rising level of long term debt compared to shirt term signifies that the borrower expect that the value of money borrowed today will be worth much less in the future or long term which suggest that the inflation expectation are worsening. A tight monetary policy reflects high interest rates, debt restructuring depends upon th sustainability of debt not on the long term to shourt term debt ratio.Hence, option a is correct

42. Falling tax rates and rising government spending tends to increase the demand, and boost consumption which is a fiscal stimulus,it has no link to investment, no impact on interest rates and legislation approval from Fed Hence, option d is correct

43. Setting of discount rate is part of monetary policy through interest rate change rest all like taxation, spending, implementation of programs all is fiscal policy Hence, option b. Is correct

44. Rising incom and inequality tend to foster GDP growth buly affecting multiplier through increase in MPC Hence, option b is correct

Rahul Sunny answered 2 years ago

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