When national output declines, the economy is said to be in
A. an inflation.
B. an expansion.
C. a deflation.
D. a recession.
Answer: D
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Depository institutions are the most important source of credit to
A) mutual funds. B) large businesses. C) small businesses. D) state governments.
If the Federal Reserve sells $20 million worth of government securities and the M1 multiplier is 2.5. Bank reserves will
A) fall by $20 million. B) fall by $50 million. C) fall by $16 million. D) fall by $8 million.
The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because
A) the market price is determined (through regulation) by the government B) the firm supplies a different good than its rivals C) the firm's output is a small fraction of the entire industry's output D) the short run market price is determined solely by the firm's technology E) the demand curve for the industry's output is downward sloping
Which of the following statements is TRUE about the public debt and future generations?
A) Future generations will always be worse off because they will have to pay off the public debt. B) Increased consumption today will lead to increases in the capital stock in the future. C) Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents. D) The public debt cannot be held by foreign residents therefore we really owe the debt to ourselves.