As a last resort the federal government may provide direct income support to farmers. One potential advantage of direct income supports is that they
A. Raise market prices.
B. Provide income security without distorting market prices and output.
C. Increase market output.
D. Reduce consumption.
Answer: B
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Classical macroeconomic theorists argued that when households reduce consumption and deposit money into savings accounts, aggregate spending will:
A. increase because households will have more wealth. B. fall because banks typically make it difficult for businesses to borrow money. C. fall because consumers are saving instead of spending. D. not fall because banks will lend that money out to businesses.
In 1938, another Agricultural Adjustment Act was passed. The error of the 1933 Act was now avoided. What had that error been?
(a) Acreage allotments (b) Combining provisions for conservation with subsidies (c) Imposition of specific taxes on food processors (d) Excessive delegation of power
To increase the money supply, the Fed might: a. increase the discount rate and sell bonds in the open market
b. decrease the reserve requirement and buy bonds in the open market. c. increase the reserve requirement and sell bonds in the open market. d. increase the discount rate and lower the reserve requirement. e. sell government securities and increase the discount rate.
Which of the following examples gives an accurate reason for a firm to shut down?
a. Bertrand shuts down his hobby shop because TR > VC. b. Joan decides to shut down her coffee shop because P < AVC. c. Juan shuts down his restaurant because P < ATC. d. Chen shuts down his bakery because TR > MC.