Suppose the Fed increases the money supply. As a result of this, people deposit excess funds into their bank accounts, causing banks to have excess reserves. As a result, the banks lower the interest rates that they charge on loans, and investment rises, causing an increase in aggregate spending. This is known as a(n)
A. indirect effect of monetary policy.
B. direct effect of monetary policy.
C. indirect effect of fiscal policy.
D. direct effect of fiscal policy.
Answer: A
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Which of the following is a limitation of discretionary fiscal policy? i. lawmaking lags ii. estimating potential GDP iii. income gap
A) i only B) ii only C) iii only D) i and ii E) i, ii, and iii
According to economist Emmanuel Saez, between 1993 and 2010, the incomes of the richest 1 percent grew by ________, and the other 99 percent grew by ________ on average.
A. 58 percent; 64 percent B. 5.8 percent; 6.4 percent C. 58 percent; 6.4 percent D. 5.8 percent; 64 percent
Poor countries often have difficulty investing in capital because
A. development assistance is designed to increase consumer goods. B. multinational corporations do not bring technological advances into poor countries. C. the population is living at subsistence level and cannot afford to save. D. they suffer from the cost disease of personal services.
Investment spending is a leakage from the circular flow model.
Answer the following statement true (T) or false (F)