The monetary expansion process from an open market operation ...

[Beheh]

The monetary expansion process from an open market operation continues until
 
  A) required reserves are eliminated.
  B) the Federal Reserve takes actions to stop the process.
  C) the discount rate is lower than market interest rates.
  D) excess bank reserves are eliminated.

Question 2

Suppose the President asks you to write him a letter suggesting ways the government might help the economy achieve permanently higher rates of economic growth.
 
  Based on your understanding of growth theory and growth accounting, what would you suggest?

[mirabriestensky]

Answer to Question 1

D

Answer to Question 2

According to both neoclassical and new growth theories, the key to faster growth is generating higher rates of technological progress. Because many technological advances are embodied in new capital, sustaining a high rate of saving and investment is important. Government might help stimulate saving supply by tax incentives such as IRAs and stimulate investment demand by offering investment tax credits, accelerated depreciation and reductions in corporate profit tax rates. New ideas are also embodied in human capital. Government can finance education and training directly and provide low-interest loans to students and training tax credits to businesses. Finally, we need to generate more new ideas, by stimulating research and development efforts. This includes government funding of basic research and tax credits to businesses for R&D expenses.