When the Fed sells government bonds it ____ reserves and ______ the money supply.
A) increases; increases
B) decreases; increases
C) decreases; decreases
D) increases; decreases
Ans: C) decreases; decreases
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Which of the following is an example of built-in stability? As real GDP decreases,
A. income tax revenues increase and transfer payments decrease. B. income tax revenues and transfer payments both decrease. C. income tax revenues and transfer payments both increase. D. income tax revenues decrease and transfer payments increase.
Gordon suggests that full indexation of production costs to nominal AD would solve the macroeconomic externality. However, individual firms would be unlikely to extend full indexation to their workers because
A) its local customers may not buy its products at the new price level. B) its suppliers may reside in foreign countries and are therefore, not subject to indexation. C) other competitor firms will not index their wages. D) All of the above.
Excess quantity demanded for a good creates pressure to push the price of that good down toward the equilibrium price
a. True b. False Indicate whether the statement is true or false
A depreciation of Israel's currency (the shekel) means that
a. Israel's exports will become more expensive b. Israel's imports will become more expensive c. Israel's imports will become less expensive d. it now requires fewer shekels to exchange for one unit of another currency e. it now requires more of other currencies in exchange for one shekel