where

r is the real cash rate (interest rate, policy rate set by the Central Bank of country D), Y is output, Y*

is potential output and π is the rate of inflation.

Suppose that primary budget balance always equals zero. What is the level of public debt at the end of year 3? The real interest rate r=0.05 and the initial stock of debt equals 100.

Which of the following is most likely to lead to a decrease in

inflationary expectations?

If the Reserve Bank sells $2 million worth of government securities via Open Market Operations, the money supply (as measured by M1) will ultimately: 

Which of the following would lead a

declining level of debt to GDP ratio, other things remaining constant?

The following table provides data for 2023 for country A. All data are in real or constant price terms. 

The following table provides data for country B. All data are in real or constant price terms. (Note, some data are for 2022, and some are for 2023).

Alex wishes to borrow money for 3 years. She can take out a

3-year loan or three consecutive 1-year loans. 

The

current annual interest rate on a 3-year loan is 5%. If she took out three

1-year loans the current interest rate on a 1-year loan starting today is 4%,

the expected interest rate on the second 1-year loan starting next year is 4.5%.

If the expectation hypothesis was to hold what would be the expected interested

rate on the third 1-year loan?

Assume

that principle and interest are repaid at the end of the loans.