Answer the following questions true (T) or false (F)
1. The slope of the investment function for the economy is called the marginal interest sensitivity of investment.
2. Contractionary fiscal policy will shift the aggregate demand curve to the left.
3. Increasing the discount makes it more expensive for commercial banks to borrow reserves at a Federal Reserve District Bank discount window.
1. TRUE
2. TRUE
3. TRUE
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
What goods are available to all without direct payment?
A. private goods B. public goods C. common goods D. toll goods
Taxes provide individuals with incentive to:
(a) Increase the number of working hours. (b) Increase productivity by working longer and harder. (c) Direct resources to uses where taxes are relatively low or nonexistent. (d) Buy and save more.
The Ricardian equivalence theorem is correct if two assumptions are true. These assumptions are that people have:
A. access to savings instruments but cannot recognize the link between deficits and future taxes. B. no access to savings instruments and cannot recognize the link between deficits and taxes. C. no access to savings instruments and recognize the link between deficits and future taxes. D. access to savings instruments and recognize the link between deficits and future taxes.