The uses-of-saving identity shows that if the government budget deficit rises, then one of the following must happen.
a. Private saving must rise, investment must fall, and/or the current account must rise.
b. Private saving must rise, investment must rise, and/or the current account must fall.
c. Private saving must rise, investment must fall, and/or the current account must fall.
d. Private saving must fall, investment must rise, and/or the current account must rise.
Answer: C
FIN 201
- Whether real seignorage revenue increases when the rate of money growth increases depends on whether
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- Consider an economy that has the following monetary data. Currency held by the nonbank public = $300 Bank reserves = $50 Monetary base = $350 Deposits = $700 Money supply = $1000 The monetary base and the money supply are expected to grow at a constant rate of 20% per year. Inflation and expected inflation are 20% per year. Suppose that bank reserves and currency pay no interest, all currency is held by the public, and bank deposits pay no interest. What is the cost to the public of the inflation tax?
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