When the Fed buys a government security, what happens to the monetary base and the quantity of money? Which changes by more or do both change by the same amount?
What will be an ideal response?
When the Fed buys a government security, both the monetary base and the quantity of money increase. As reflected by the money multiplier, the increase in the quantity of money exceeds the increase in the monetary base.
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Moving along a bowed-out PPF between milk and cotton, as more milk is produced the marginal cost of an additional gallon of milk
A) rises. B) does not change. C) falls. D) probably changes, but in an ambiguous direction.
Which of the following is true regarding the foreign holdings of U.S. dollars?
What will be an ideal response?
According to the law of supply:
A. more of a good is desired by consumers as the price falls. B. less of a good is desired by consumers as the price rises. C. more of a good will be offered by suppliers as the price rises. D. less of a good will be offered by suppliers as the price rises.
Assume that the economy is in a recession and there is a budget deficit. A strict balanced-budget amendment that would require the federal government to balance its budget during a recession would be:
A. expansionary and worsen the effects of the recession. B. expansionary and counter the effects of the recession. C. contractionary and worsen the effects of the recession. D. contractionary and counter the effects of the recession.