1 if seignior age is 4b the current deficit is 30b the struc

1. if seignior age is $4b, the current deficit is $30b, the structural deficit is $10b, the money supply is $600b, the publicly held national debt is $400b, real growth is 2%, and the economy is at its long-run average unemployment rate, what is the inflation rate?

a. 2%

b. 4%

c. 6%

d. none of the above.

2. suppose the US dollar is depreciating against the Canadian dollar by 5% per year. If the US nominal interest rate is 10% and the risk premium is 1%(Canada is riskier), then Canada’s nominal interest rate is:

a. 5% or less.

b. more than 5% but not more than 10%.

c. more than 10% but not more than 15%.

d. more than 15%.

Solution

First question is answered below

Correct option: 2%

Reason: When the economy is at long run average unemployment rate, inflation rate equals real growth rate of economy, which is 2%