Suppose a nation reduced taxes by $20 billion. The direct change in the monetary base would be:
a. Equal to +$20 billion because the government pumps new money into the economy when it lowers taxes.
b. Greater than +$20 billion because the M2 money multiplier would inflate the $20 billion of new monetary base.
c. Equal to $0.
d. Equal to $20 billion times the reserve ratio on checking accounts.
e. Less than $20 billion because some of the newly created funds would leak into the system in the form of currency in circulation.
.C
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According to ________, the economy is normally at potential GDP
A) real business cycle models B) the adaptive expectations theory C) the short-run Phillips curve D) new Keynesian economists
In a two-period model with production, an anticipated future increase in domestic total factor productivity
A) increases domestic output and increases the current account surplus. B) increases domestic output and decreases the current account surplus. C) has no effect on domestic output and increases the current account surplus. D) has no effect on domestic output and decreases the current account surplus.
In constructing a stable demand curve for product X:
A. the prices of other goods are assumed constant. B. the supply curve of product X is assumed to be fixed. C. money incomes are allowed to vary. D. consumer preferences are allowed to vary.
If cyclical unemployment is negative, then
A. the natural rate of unemployment is getting smaller. B. the actual unemployment rate is below the natural rate of unemployment. C. there have been some errors in classifying the type of unemployment experienced by some people. D. structural unemployment must be increasing.