If a country with a large government debt uses money creation to service and repay the debt, this will lead to
a. lower interest rates.
b. an appreciation of the nation's currency in the foreign exchange market.
c. inflation, higher interest rates, and a financial crisis.
d. rapid economic growth, as the expansionary monetary policy stimulates the economy and generates the additional tax revenue to service the larger debt.
C
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If production point is inside the production possibilities frontier
A) it is not possible to produce more of both goods. B) production is inefficient. C) in order to produce more of one good, less of the other must be produced. D) production is in the "unattainable" region.
If the Fed believes the natural rate of unemployment is 5.5 percent and the natural rate is really 5 percent, what is likely to happen in the short run?
a. The Fed will allow unemployment to be unnecessarily high and output to be unnecessarily low. b. The Fed will allow unemployment to be unnecessarily high, but output will remain at potential. c. The Fed will allow unemployment to be unnecessarily low and output to be unnecessarily high. d. The Fed will allow output to be unnecessarily low, but unemployment will remain at the natural rate. e. The Fed will allow unemployment to be unnecessarily low and output to be unnecessarily low.