The simple spending multiplier understates the amount by which output changes
a. True
b. False
Indicate whether the statement is true or false
False
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Suppose the current federal funds rate is 0.25% and the Fed chooses to raise its target to 0.5%. Make use of a graph of the federal funds market to show how it will use open market operations to accomplish this
What will be an ideal response?
Government gives subsidies to encourage production of products with beneficial externalities
a. True b. False Indicate whether the statement is true or false
To get a complete measure of the total spending on U.S.-produced final goods and services, one must adjust aggregate demand by
a. adding imports and subtracting exports. b. adding imports that are purchased by U.S. consumers. c. adding exports and subtracting imports. d. subtracting exports sold to foreigners.
The basket of goods measured in computing the Consumer Price Index (CPI) includes goods produced in prior years and imported goods.
Answer the following statement true (T) or false (F)