Question

Which of the following statements regarding monetization is false?

a.	Laws in the United States do not allow the government to borrow borrowing directly from the central bank.	b.	The amount of income the government derives from monetization is measured by the resulting increase in the monetary base.
c.	In current times, issuing new money means literally printing new paper money to hand out to civil servants, contractors, and creditors.	d.	If used without limit, monetization provides absolute protection against equitable insolvency.

The nation of Lower Volta announces that its exports exceed its imports. We would refer to this as a current account __________ that results in a financial __________.

a.	deficit; outflow	b.	surplus; outflow
c.	deficit; inflow	d.	surplus; inflo

Fiscal policy may be both procyclical and expansionary at the same time.

a.	True	b.	False

If citizens anticipate higher taxes in the wake of a fiscal stimulus, then the expenditure multiplier will be _________; and in the absence of accommodation by the Fed, the expenditure multiplier will be _________.

a.	smaller; smaller	b.	larger; smaller
c.	smaller; larger	d.	larger; larger

A variable, like the Fed’s discount rate, is an example of which of the following?

a.	A policy goal	b.	An operating target
c.	An intermediate target	d.	A policy instrument

Answer 1

-- Which of the following statements regarding monetization is false?

Answer: c. In current times, issuing new money means literally printing new paper money to hand out to civil servants, contractors, and creditors.

--The nation of Lower Volta announces that its exports exceed its imports. We would refer to this as a current account __________ that results in a financial __________.

Answer: d. surplus; inflow

Explanation: If exports exceed imports, the net exports figure would be positive, indicating that the nation has a trade surplus. Positive net sales abroad generally contribute to a current account surplus

-- Fiscal policy may be both procyclical and expansionary at the same time.

Answer: a. True.

Explanation: Pro-cyclical fiscal policy implies that fiscal policy is expansionary in times of boom and contractionary in times of recession.

--If citizens anticipate higher taxes in the wake of a fiscal stimulus, then the expenditure multiplier will be _________; and in the absence of accommodation by the Fed, the expenditure multiplier will be _________.

Answer: a smaller; smaller

Explanation: The tax multiplier is the magnification effect of a change in taxes on aggregate demand.  The higher the tax rate, the smaller the amount of any increase in income that households have available to spend, which in turn reduces the size of the multiplier effect. An accommodative monetary policy is typically characterized by a succession of decreases in the Federal funds rate which makes money easier (cheaper) for business to borrow.

-- A variable, like the Fed’s discount rate, is an example of which of the following?

d. A Policy Instrument.

The interest on loans given out to commercial institutions are discount rate, which is a monetary policy tool/instrument used by the Federal Reserve to stimulate the U.S economy.