A temporary decrease in government purchases causes the real interest rate to ________ and output to ________ in the short run, before prices adjust to restore equilibrium.
A. rise; rise
B. rise; fall
C. fall; rise
D. fall; fall
Answer: D
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It is believed, by many, that the underground economy has grown in the United States in recent years causing c to increase and to be volatile
This event implies that the money multiplier should ________ and that the Fed should have a(n) ________ job in controlling the money supply. A) increase; easier B) increase; more difficult C) decrease; easier D) decrease; more difficult
An oligopolist cares very much about what other firms in her industry are doing.
Answer the following statement true (T) or false (F)
Bank reserves include:
a. High quality (i.e., AAA-rated) loans. b. Vault cash and deposits at the central bank. c. Tellers, who are trained and ready to work in case of a general bank strike. d. Government bonds, high-quality (e.g., AAA) corporate stocks, and cash in circulation. e. Checking deposits and borrowings from the central bank.
Ricardian equivalence predicts:
A. the consumers need to feel as though they will not have to pay in the future for current spending to make current tax cuts effective expansionary policy. B. if people perceive current tax cuts to mean higher tax payments in the future, the cuts will have little expansionary effect. C. that if governments cut taxes but not spending, people will not change their behavior. D. All of these are true.