To reduce inflation, the federal reserve could
a) expand money supply in order to raise interest rates, which increases investment
b) expand money supply in order to lower interest rates, which increases investment
c) contract money supply in order to lower interest rates, which increases investment
d) contract money supply in order to raise interest rates, which decreases investment
e) buy bonds and increase discount rate to encourage borrowing
Ans: d) contract money supply in order to raise interest rates, which decreases investment
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The idea that aggregate price levels do not affect real outcomes in the economy is called the:
A. neutrality of money. B. aggregate price theory. C. neutrality of prices. D. real output theory.
Which is an example of an automatic stabilizer? As real GDP decreases, income tax revenues:
A. increase and transfer payments decrease. B. and transfer payments decrease. C. and transfer payments increase. D. decrease and transfer payments increase.
The change in business inventories is a component of investment.
Answer the following statement true (T) or false (F)
A political equilibrium can never be reached without voters, firms, politicians and ________
A) bureaucrats B) public costs C) indifference curves D) market prices