Each year since winning control of the House of Representatives in the 2010 election, Tea Party Republicans have argued that we need to immediately initiate sharp reductions in government spending and entitlement programs and rapidly move towards a balanced budget, (although they have never actually produced a budget proposal in which tax revenues would match government spending plus entitlement transfers). Many Democrats, while arguing that tax rate increases on high income earners need to be part of the any deficit reduction program, have agreed that we need to initiate budget deficit reduction now.

A) What is the argument against attempting to balance the Federal Government budget rapidly at the present time via either deep cuts in Federal Government spending on goods and services or via sharp increases in federal income tax rates?

B) Does this argument imply that budget deficits don't matter in the long run? If not, why might the impact of large deficits predicted in the long run if there is no change in current tax, entitlement or defense spending programs be different than the impact of budget deficits today?

What must the CFO expect about the Pounds/$ exchange rate 1 year from now if she chooses to invest in the US $ CD's instead of the British Pound CD's? (Note: a specific numeric answer is required for full credit. Part credit can be earned for correctly discussing the expected direction of change in the exchange rate without supplying an exact answer.