According to the monetarist theory, an increase in government spending would have
a. only weak effects on both output and the price level.
b. a weak effect on output with a strong effect on the price level.
c. a weak effect on the price level but a strong output effect.
d. stronger effects on output if financed with increases in the money supply.
e. both a and d.
E
You might also like to view...
As more workers are hired to harvest grapes in a vineyard, the fields become overcrowded. As a result, the marginal product of labor is likely to diminish
a. True b. False Indicate whether the statement is true or false
A government budget deficit affects the supply of loanable funds, rather than the demand for loanable funds, because
a. in our model of the loanable funds market, we define "loanable funds" as the flow of resources available to fund private investment. b. in our model of the loanable funds market, we define "loanable funds" as the flow of resources available from private saving. c. markets for government debt are fundamentally different from markets for private debt. d. of our assumption that the economy is closed.
An increase in government spending that is NOT financed by an increase in taxes will cause which of the following?
A. an increase in interest rates and a reduction in planned investment B. an increase in interest rates and an increase in planned investment C. a reduction in interest rates and an increase in planned investment D. a reduction in interest rates and a reduction in planned investment
A decrease in the discount rate ________ bank reserves and ________ the money supply if banks respond appropriately to the change in the rate
A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases