Bank reserves increase when the Treasury finances an expenditure through
A) taxation.
B) borrowing from the non-bank public.
C) borrowing from the banking system.
D) borrowing from the Fed.
A
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Which of the following explains why a $100 billion reduction in consumption spending might decrease equilibrium real GDP by more than $100 billion?
a. Say's law. b. The quantity theory of money. c. Flexible resource prices. d. The multiplier principle.
Federal Reserve actions that increase nominal interest rates and decrease the money supply:
A. raise bond prices. B. close a recessionary gap. C. close an expansionary gap. D. raise the rate of inflation.
If the Ricardian equivalence proposition is correct, then an increase in the deficit will lead to
A) an increase in private saving. B) a decrease in investment spending. C) a lower standard of living in the future. D) all of the above E) none of the above
Why might firms pay wages that are above the equilibrium wage in a market?
A) to increase the productivity of their workers B) to reduce the unemployment rate C) to encourage workers to form labor unions D) to reduce profit