The Fed can close a recessionary gap by:

Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's net investment is ________ mowers

A) 13 B) 7 C) 10 D) 20 E) 27

Before the Great Depression of the 1930s, the majority of government spending took place at the ________ and after the Great Depression the majority of government spending took place at the ________

A) federal level; state level B) federal level; state and local levels C) state and local levels; federal level D) local level; federal level

Most economists think that the Keynesian position is that

A) the wage rate will never fall and the price level will never adjust downward if the economy is in a recessionary gap. B) the time required before wages and prices adjust downward is short enough for the economy to be called self-regulating. C) the time required before wages and prices adjust downward is long enough for the economy to exist in a recessionary gap for a long time. D) the time required before wages and prices adjust downward if the economy is in a recessionary gap is rather long, but short enough for the economy to be considered self-regulating.

Assume that because of a long policy lag, the Fed starts implementing expansionary monetary policy too late, i.e., at a time when the economy is already healing itself. As a result, the economy will probably move from an initial

A) recessionary gap to an even deeper recessionary gap. B) recessionary gap to an inflationary gap. C) inflationary gap to the natural level of Real GDP. D) inflationary gap to a recessionary gap.