Which is an important problem associated with the public debt?
A. Government borrowing to finance the debt may increase the level of private investment.
B. Payments of interest on the debt lead to greater income equality.
C. Payment of interest on the debt held by foreigners transfers real resources abroad.
D. Interest payments on the debt tend to improve economic incentives to work and produce more unemployment.
Answer: C
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Everything else held constant, an increase in the riskiness of bonds relative to alternative assets causes the demand for bonds to ________ and the demand curve to shift to the ________
A) rise; right B) rise; left C) fall; right D) fall; left
The maximum money that can be created by the entire banking system is equal to a multiple of its excess reserves
a. True b. False Indicate whether the statement is true or false
When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an
a. excess demand for money which causes the price level to rise. b. excess demand for money which causes the price level to fall. c. excess supply of money which causes the price level to rise. d. excess supply of money which causes the price level to fall.
Which of the following functions of money would be violated if inflation were high?
a. unit of account b. store of value c. certificate of gold d. medium of exchange