Suppose two economies, the United States and Saudi Arabia, each have a GDP of $1,000 . A U.S. war effort involves the purchase of $100 of Saudi oil, which is financed by selling $100 worth of U.S. government bonds to Saudi Arabia. In subsequent years, GDP remains at $1,000 for each country and the United States imposes a $10 tax to make its debt payments to the Saudis. Now while the United States
is still debt obligated,
a. U.S. consumption is $1,000 and Saudi consumption is $1,000
b. U.S. consumption is $990 and Saudi consumption is $990
c. U.S. consumption is $1,010 and Saudi consumption is $990
d. U.S. consumption is $1,000 and Saudi consumption is $1,010
e. U.S. consumption is $990 and Saudi consumption is $1,010
E
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In the money market, a condition of excess supply of money can be eliminated by a ________ in aggregate output or a ________ in the interest rate, everything else held constant
A) rise; rise B) rise; fall C) fall; rise D) fall; fall
Unanticipated inflation benefits
A) people or businesses who owe funds. B) people or businesses who lend funds. C) people who live on a fixed income. D) people with CDs (certificates of deposits) in the bank.