1. The discount rate is A. the interest rate the Fed charges to banks for loans
ID: 1227845 • Letter: 1
Question
1. The discount rate is
A.
the interest rate the Fed charges to banks for loans from the Fed.
B.
the interest rate banks charge their best customers.
C.
the interest rate banks charge each other for overnight loans.
D.
the interest rate the U.S. Treasury pays on Treasury Bills.
2. Contractionary monetary policy causes
A.
aggregate demand to fall and the price level to rise.
B.
aggregate demand to fall and the price level to fall.
C.
aggregate demand to rise and the price level to rise.
D.
aggregate demand to rise and the price level to fall.
3.
If the federal government's expenditures are less than its tax revenues, then
A.
a budget surplus results.
B.
a budget deficit results.
C.
the budget is balanced.
D.
No conclusion can be drawn here regarding the budget surplus or deficit without information regarding government purchases versus other outlays.
4.Based on the following information, what is the balance on the current account?
Exports of goods and services = $5 billion
Imports of goods and services= $3 billion
Net income on investments =
minus$2
billionNet transfers =
minus$2
billion
Increase in foreign holdings of assets in the United States = $4 billion
Increase in U.S. holdings of assets in foreign countries = $1 billion
A.
minus$2
billion
B.
$1 billion
C.
$3 billion
D.
$4 billion
5. If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per Americandollar, how many American dollars are required to buy a product that costs 2.5 Canadian dollars?
Explanation / Answer
1. The discount rate is
Solution: A. the interest rate the Fed charges to banks for loans from the Fed.
Explanation: The discount rate is the interest rate that the Fed charges a bank for a loan.
2. Contractionary monetary policy causes
Solution: B) aggregate demand to fall and the price level to fall.
Explanation: Contractionary monetary policy decreases the money supply in an economy policy; consumer spending will be less, causing aggregate demand to fall
3. If the federalgovernment’s expenditures are less than its tax revenues, then
Solution: A) a budget surplus results.
Explanation: If G<T , it's a Budget Surplus
4. What is the balance on the current account? Exports of goods and services = $5 billion Imports of goods and services= $3 billion Net income on investments =- $2billion Net transfers =- $2billion Increase in foreign holdings of assets in the United States = $4 billion
Solution: C $3 billion
Explanation: current account is calculated by adding up the 4 components : goods, services, income and current transfers
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