Suppose the Fed increases the money supply. As a result of this, people go out and spend more money on consumer goods, increasing aggregate spending. This is known as a(n)
A. direct effect of fiscal policy.
B. direct effect of monetary policy.
C. indirect effect of fiscal policy.
D. indirect effect of monetary policy.
Answer: B
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Which of the following would cause a rightward shift of the supply curve for cell-phone services?
A. an increase in the price of cell-phone services B. a decrease in a subsidy given to cell-phone service providers C. a decrease in the wages of workers employed by cell-phone companies D. an increase in the taxes paid by cell-phone service providers
Which of the following is a deficiency of the regular (or traditional) consumer price index (CPI) as a measure of the cost of living?
a. The CPI fails to make any adjustment for changes in the price of housing. b. The CPI only measures changes in the prices of food, clothing, and energy. c. The CPI fails to maintain the quantities of the typical bundle of goods purchased by consumers constant over a lengthy time frame. d. The CPI does not adjust regularly for the fact that consumers will shift their spending away from goods that become more expensive.
Discuss the determinants of the equilibrium interest rate. What can the Fed do to change the interest rate?
What will be an ideal response?
Recall the Application about the Fed's response to the collapse of the investment house Bear Stearns as well as its handling of the 2008 financial crisis with respect to other financial institutions to answer the following question(s). According to this Application, the Fed responded to the financial crisis by continuing to develop new programs. One example of this was its announcement that it would now purchase commercial paper, which is the short-term debt of corporations. This is an example of the Fed acting as a:
A. medium of exchange. B. lender of last resort. C. store of value. D. unit of account.