Suppose the economy experiences a recessionary gap. Policymakers who believe that government is too big would favor which of the following policies to close the gap?
A) decreases in transfer payment
B) decreases in income tax rates
C) increases in government purchases
D) increases in interest rates
Ans: B) decreases in income tax rates
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The nominal interest rate is determined in the
A) bond market. B) stock market. C) exchange market. D) money market.
In 2010, gross private domestic investment constituted ________ percent of nominal GDP
A) 70.4 B) 12.4 C) 18 D) -5.4
Which of the following must occur to sustain economic growth in the long run?
A) technological progress B) capital accumulation C) a higher saving rate D) all of the above
In 2008, the Treasury and Federal Reserve took action to save large financial firms such as Bear Stearns and AIG from failing. Which of the following is one reason why these measures were taken?
A) The Emergency Economic Stabilization Act required the Fed and the Treasury to provide financial assistance to firms that participated in regular open market actions with the Fed. B) The bankruptcy of a large financial firm would force the firm to sell its holdings of securities, which could cause other firms that hold these securities to also fail. C) The Fed and the Treasury wanted to allow Freddie Mac and Fannie Mae more time to buy the firms before they went bankrupt. D) The failure of these firms would have forced the Fed to increase interest rates, which could have led to a severe recession.