Question Details

Which of the conclusions below is the least reasonable to draw


"The damaging effect to the marketplace created by the persistence of heavy government borrowings is an ever-present concern for bond investors. A fear is that the solution to the government's seemingly insatiable appetite for funds will be debt monetization. As a result, most observers expect interest rates to remain historically high." 
1. Debt monetization will 
a) raise bond prices b) lower bond prices 
c) increase the deficit d) decrease the deficit 
2. Interest rates remain high primarily because of 
a) tight monetary policy b) fear of future inflation 
c) unemployment worries d) fear of future tax increases 
3. "High interest rates, not the deficit, are the country's major problem. It is high interest rates that have caused unemployment which in turn has cut into government revenues and forced up spending, adding to the deficit." Which of the conclusions below is the least reasonable to draw? 
a) the deficit has resulted from high unemployment 
b) the high interest rates have resulted from high inflation 
c) the high unemployment has resulted from fighting inflation 
d) the monetary authorities should increase the money supply to attack unemployment and lower interest rates 
4. “Price-level targeting is the latest suggestion for monetary policy. This policy would target on an inflation rate measured over the next three years, say, rather than over the next year.” The advantage of this proposal is that monetary policy would 
a)	hold the rate of growth of the money supply constant 


b)	fix the interest rate 
c)	target on the inflation rate 
d)	allow short-term deviations from a targeted inflation rate 



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