If countries decide they will no longer buy U.S. assets or lend to the United States:
A. adjustments will be set in motion to equalize comparative advantages.
B. the United States can begin to run a trade deficit.
C. adjustments will be set in motion so that the United States has more comparative advantages.
D. There is no reason foreign countries will not want to buy more U.S. assets than the United States buys of foreign assets.
Answer: A
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
Suppose Warren Buffet withdraws $1 million from his checking account at Chase Bank. If the required reserve ratio is 20 percent, what is the maximum change in deposits in the banking system?
A) -$5 million B) -$4 million C) -$200,000 D) $1 million E) $5 million
A government policy that is consistent with real business cycle theory would be for
A) government to vary its spending in response to shocks to total factor productivity. B) the monetary authority to expand and contract the nominal money supply in response to shocks to total factor productivity. C) government to smooth out tax distortions over time. D) government to vary its lump-sum tax collections in response to changes in total factor productivity.
Government controls over market prices frequently “backfire.”
Answer the following statement true (T) or false (F)