If the economy is experiencing inflation, then the most appropriate government policy would be to:
a. shift the aggregate demand curve by using a tax increase coupled with spending cuts.
b. shift the aggregate demand curve by using a tax increase coupled with more spending.
c. shift the aggregate demand curve by using a tax cut coupled with spending cuts.
d. shift the aggregate demand curve by using a tax cut coupled with more spending.
e. shift the aggregate supply curve by using a tax cut coupled with spending cuts.
a
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An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
A problem with the too-big-to-fail policy is that it ________ the incentives for ________ by big banks
A) increases; moral hazard B) decreases; moral hazard C) decreases; adverse selection D) increases; adverse selection
The ability to lower the average costs of production for one product is possible with
a. Economies of scale b. Economies of Scope c. Diseconomies of Scale d. Diseconomies of Scope
Use the following diagram to answer the next question.
Assume the economy is initially at the full employment level of real GDP. If there is a decrease in gross investment, the Fed should ________.
A. increase the money supply B. decrease money demand C. increase money demand D. decrease the money supply