1.Which of the following subcomponents of GDP can be either positive or negative

Question

1.Which of the following subcomponents of GDP can be either positive or negative? a. inventory investment b. exports c. government purchases d. All of the above are correct. 2. The reserve requirement is 4%, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 of bonds what happens to the money supply? a. it increases by $250,000 b. it increases by $200,000 c. it decreases by $200,000 d. it decreases by $250,000 3. If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by a. $64 of new reserves. b. $448 of new reserves. c. $700 of new reserves. d. $800 of new reserves. 4, You put money into an account that earns a 8 percent nominal interest rate. The inflation rate is 3 percent, and your marginal tax rate is 25 percent. What is your after-tax real rate of interest? a. 3 percent b. 3.75 percent c. 5 percent d. 6 percent

Explanation / Answer

1 a. inventory investment 2 d. it decreases by $250,000; (1000/.04) 3 c. $700 of new reserves; (5600*.125) 4 b. 3.75 percent (8-3=5 then 5*.75 = 3.75)

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