Suppose that in 2010 the government collected $300 billion in revenue and spent

Question

Suppose that in 2010 the government collected $300 billion in revenue and spent $370 billion, while in 2011 the government revenue increased to $360 billion and its spending fell to $340 billion. If the government did not have any debt at the beginning of 2010, how much debt would it have by the end of 2011?

Select one:

a. $20 billion

b. $30 billion

c. $50 billion

d. $60 billion

e. $70 billion

Which one of these policies should the Fed engage in if unemployment is 9% and inflation is 1.5%?

Select one:

a. Issue new government bonds and increase government borrowing

b. Sell government bonds through an Open Market Operation

c. Increase discretionary government spending

d. Raise the Required Reserves Ratio

e. Target a lower Federal Funds Rate

Which one of these tasks is a role that the Fed has?

Select one:

a. Telling banks what interest rates they must charge on mortgages (house loans)

b. Issuing new government bonds to increase government borrowing

c. Collecting taxes on behalf of the federal government

d. Regulating credit unions

e. Fixing the exchange rate between the Euro and the dollar

Using Internet surveys to collect data about production and unemployment is likely to reduce which one of these lags:

Select one:

a. The recognition lag

b. The chronicle lag

c. The legislative lag

d. The technology lag

e. The impact lag

Explanation / Answer

1) The answer is C-) $50 billion

Because ik 2010, the government has a deficit of $70 billion .thus $70 billion debt. And in 2011 , the government has surplus of $20 billion . Thus total debt in 2011 is $50 billion.

2) The answer is E) target a lower federal funds rate.

When the federal funds rate is decrease, then the commercial bank can borrow more money frm fed, when banks have more then it can lend at lower interest rate which increase the aggregate demand in the economy and in result price level increases and unemployment decreases.

3) The answer is b) issuing new government bonds to increase government borrowing.

4) The answer is E) The impact log

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