Which of the following would be most likely to cause an increase in current aggregate demand in the United States?
a. increased fear that the U.S. economy was going into a recession
b. an increase in the real interest rate
c. a reduction in the expected rate of inflation
d. rapid growth of real income in Canada and Western Europe
D
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
The legal reserve requirement is determined by
a. savings and loans b. banks c. Congress d. the FDIC e. the Federal Reserve
In the short run, the chain of causality between monetary policy and the exchange rate under fixed rates differs from a floating rate. How?
a. In a fixed rate regime, the money supply is determined first, then interest rates, then the short-run exchange rate. b. In a fixed rate regime, interest rates are determined first, then the money supply, and then the short-run exchange rate. c. In a floating rate regime, exchange rates are determined first, then the nominal interest rate (according to uncovered interest parity), and then the money supply. d. In a fixed rate regime, exchange rates are determined first, then the nominal interest rate (according to uncovered interest parity), and then the money supply.
If people held all their money as cash:
A. money would lose its value as a store of wealth. B. money would no longer be a financial liability of the Fed. C. banks could not create money. D. banks would still be able to create money by making loans.