When interest rates are near zero and traditional monetary policy is ineffective, the Fed or other central bank may resort to a strategy referred to as quantitative easing. What does this strategy involve?
A) allowing interest rates to rise slowly by providing substantial reserves for as long as is necessary to avoid inflation
B) reducing the money supply to raise the interest rates slowly without discouraging spending
C) keeping interest rates very low by providing substantial reserves for as long as is necessary to avoid deflation and encourage spending
D) increasing the money supply and interest rates at a constant rate to stimulate economic activity
Ans: C) keeping interest rates very low by providing substantial reserves for as long as is necessary to avoid deflation and encourage spending
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Which of the following may partially reduce the geographical disadvantages faced by poorer countries?
A) Limiting the use of natural resources so that they can be preserved for future uses B) Transferring technology from richer to the poorer countries C) Restricting the immigration of skilled workers from foreign countries to the poorer countries D) Limiting the participation of poorer countries in international trade
An increase in the sensitivity of private spending (consumption, investment, and net exports) to changes in the interest rate ________ the government purchases multiplier
A) may increase or may decrease B) will not change C) will increase D) will decrease
Other things equal, an increase in transfer payments will ________ consumption expenditures, which leads to ________ in output and employment
A) increase; an increase B) increase; a decrease C) decrease; an increase D) decrease; a decrease
A price increase will always cause a firm's revenue to fall, because they will sell less of the good
a. True b. False Indicate whether the statement is true or false