In the base year:
A. nominal and real GDP are equal by definition.
B. nominal GDP is always larger than real GDP because prices are held constant.
C. real GDP is always larger than nominal GDP because prices are held constant.
D. real GDP will only be larger than nominal GDP if prices increased in the base year.
A. nominal and real GDP are equal by definition.
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Refer to the above figure. As the real national income expands from Y2 to Y3,
A) tax revenues fall. B) a budget deficit occurs. C) government transfers rise. D) a budget surplus occurs.
The government sometimes creates an excess demand for a product by setting a maximum price at which the product may be sold to consumers. This is sometimes called a
A) subsidy. B) price floor. C) tax. D) price ceiling.
Subprime mortgages are
A) mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgages. B) mortgages issued to borrowers with flawed credit histories. C) mortgages which are bundled together by financial institutions and sold to investors. D) government-backed mortgages issued by Fannie Mae and Freddie Mac.
The Fed has which of the following as its strongest control over the money supply?
a. interest rate changes b. the discount rate c. open market operations d. the required reserve rate