Which of the following is true when the government attempts to move the economy to full employment by increasing spending?
A. The desired stimulus should be set by the multiplier divided by the AD shortfall.
B. The total change in spending includes both the new government spending and the subsequent increases in consumer spending.
C. It must initially spend more than the GDP gap if the aggregate supply curve is upward-sloping.
D. The desired stimulus should be set by the AD shortfall multiplied by the multiplier.
Answer: B
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Loans by the Federal Reserve to banks are known as
A) repurchase agreements. B) Federal funds. C) discount loans. D) cash items in the process of collection.
Which of the following will shift today's supply curve to the right?
A) Input prices rise. B) Sales taxes increase. C) Prices are expected to be higher in the future. D) Prices are expected to be lower in the future.
If the government cuts income taxes, then the
a. investment curve will shift upward b. investment curve will shift downward c. consumption curve will shift downward d. consumption curve will shift upward e. economy will move to a new point along the existing consumption curve
IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt
A. fixed exchange rates. B. expansionary monetary policies. C. contractionary monetary policies. D. state ownership of industry.