To fight inflation, the government may
A. decrease aggregate demand, which will also lead to lower unemployment rates.
B. increase aggregate demand, which will also lead to lower unemployment rates.
C. increase aggregate demand, which will also lead to higher unemployment rates.
D. decrease aggregate demand, which will also lead to higher unemployment rates.
Answer: D
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In a fiduciary monetary system
A) coins get their value from the precious metals of which they are made. B) money gets its value from the confidence that the public has in its acceptability. C) paper currency does not have value, but balances in checking accounts do. D) checking account balances do not have value, but paper currency does.
How does an increase in government transfer payments affect aggregate demand?
a. It has the same effect as a tax increase, which lowers AD with a larger multiplier than a spending decrease. b. It has the same effect as a tax cut, which increases AD but with a smaller multiplier than a change in spending. c. It has the same effect as a spending increase, which increases AD with a larger multiplier than a tax cut. d. It has the same effect as a spending decrease, which increases AD with a larger multiplier than a spending decrease.
When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by
a. more than $1000. b. exactly $1000. c. less than $1000. d. None of the above are correct.
When a major car company lowers its prices, other car makers will probably
a. maintain existing prices. b. raise their prices. c. go out of business. d. lower their prices.