Answer the following questions true (T) or false (F)
1. An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to decrease the money supply.
2. To complement actions by the Fed to reduce inflation, Congress and the President can cut spending and/or raise taxes.
3. The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises.
1. FALSE
2. TRUE
3. TRUE
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The demand and supply schedules for pizza are in the table above. A price ceiling of $2 per slice results in
A) a surplus of 20 slices of pizza. B) a shortage of 20 slices of pizza. C) a shortage of 40 slices of pizza. D) a shortage of 60 slices of pizza. E) neither a shortage nor a surplus.
Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. On the other hand, a Bangladeshi worker can produce 100 pairs of gloves or grow 200 radishes per day. Using the concepts of advantage and trade, we can say that the opportunity cost of one pair of gloves is:
A. lower for the United States than Bangladesh, therefore the United States has a comparative advantage in glove production. B. higher for the United States than Bangladesh, therefore the United States has a comparative advantage in radish production. C. the same for both the United States and Bangladesh, therefore no comparative advantage exists. D. the same for both the United States and Bangladesh, therefore they both have the comparative advantage in glove production.
Other things constant, an increase in interest rates will
A) increase your incentive to borrow. B) increase your incentive to save. C) increase your incentive to buy a new car on credit. D) reduce your incentive to save.
Monetary restraint is associated with all of the following except
A. A decrease in aggregate demand. B. An increase in the reserve requirement. C. A decrease in interest rates. D. A decrease in the money supply.