If there is a sudden increase in government spending, which of the following should the Fed do if it wants to keep output unchanged?
a. Do nothing, since the self-correcting mechanism will adjust the economy
b. Sell bonds in the open market
c. Wait, since output usually does not change when government spending increases
d. Decrease the required reserve ratio
e. Buy bonds in the open market
B
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Marginal product crosses the horizontal axis (is equal to zero) at the point where
A) average product is maximized. B) total product is maximized. C) diminishing returns set in. D) output per worker reaches a maximum. E) All of the above are true.
The Fed can increase the money supply by conducting open market sales of U.S. Treasury Bonds, or by raising the required reserve ratio
Indicate whether the statement is true or false
Using a common resource:
A. creates a positive externality for others. B. maximizes total surplus. C. imposes a negative externality on others. D. is an irrational decision.
Seignorage is an especially important source of government revenue in countries
a) with weak credit industries b) with low inflation rates c) with high tariffs on imports d) with a currency tied to the dollar e) that still use commodity money