Fiscal policy actions that are intended to have long-run effects on real GDP attempt to increase ________ through changing ________
A) aggregate supply; government spending B) aggregate demand; taxes
C) aggregate supply; taxes D) aggregate demand; government spending
C
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Suppose that one-year Treasury bills yield 4 percent in the United States and 5 percent in Germany. Investors will be indifferent between them if they expect the dollar over the next year to
A) depreciate against the euro by approximately 1 percent. B) appreciate against the euro by approximately 1 percent. C) depreciate against the euro by exactly 20 percent. D) appreciate against the euro by exactly 20 percent.
Why was the Fed reluctant to rescue insolvent banks?
A) It thought it may lead to moral hazard. B) It thought it may lead to adverse selection. C) It thought they were still liquid. D) It did not think they were insolvent.
In the long run, following a combination of a negative demand shock and a temporary negative supply shock, ________
A) both inflation and output return to the original long-run equilibrium values B) inflation is permanently increased, while output returns to potential output C) output returns to potential output, while inflation may be higher or lower than its initial value D) inflation is permanently reduced, while output returns to potential output E) none of the above
Assume the U.S. government wants to hold the value of the dollar at $1.00 U.S. equals 10 Chinese yuan, but it finds that the value of yuan is depreciating against the U.S. dollar. What would be an appropriate policy to reverse this trend?
A) Increase government spending within the U.S. B) Buy U.S. dollars. C) Sell U.S. dollars. D) Increase the money supply in the U.S.