1. The US Treasury received $1 trillion in tax payments. It spent $850 billion on “current” goods and services plus transfer payments and interest on existing bonds. It spent $200 billion on capital projects (such as highways and medical research). Which of the following is correct?
It has a surplus of $150 billion but must issue $50 billion in new bonds
It has a deficit of $50 billion and must issue $50 billion in new bonds
It has a deficit of $50 billion and must issue $150 billion in new bonds
It has a surplus of $150 billion and can pay off $150 billion in existing bonds
2. Which of the following will increase a bank’s interest margin?
An increase in the percentage of deposits that are demand deposits
An increase in the percentage of bonds that are Treasury bonds
An increase in the required reserves ratio (assuming the bank holds no excess reserves)
An increase in the interest rate the Fed pays on reserves