(Solution)-The earlier predictions underestimated currency

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30. "The earlier predictions underestimated currency in circulation and treasury balances at the Fed, both of which drained reserves from the banking system." Lower reserves meansa) lower interest rates b) lower money supplyc) lower unemployment d) higher inflation31. "A significant difference exists between the consequences of federal as opposed to state borrowing if the federal government borrows by selling bonds to the Federal Reserve. It alone can do so - the central bank buys only federal bonds." This significant difference is that state borrowinga) reduces taxes b) reduces unemploymentc) doesn't have to be repaid d) cannot increase the money supply"Economists call the process debt monetization. Without it, rising federal deficits tend merely to shuffle spending to the government sector from the private sector."32. Debt monetization is financing deficits bya) raising taxes b) raising the interest ratec) selling bonds to the public d) selling bonds to the central bank

 

Solution ID:10086535 | Question answered on 16-Oct-2016

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