The major purpose of the Federal Reserve buying government securities in open market operations is to ________.
A. raise money for government spending
B. reduce the excess reserves of banks
C. allow banks to increase their lending
D. increase interest rates
Answer: C
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The earned income tax credit (or EITC):
A. reduces the sales tax paid by low-income workers. B. provides tax credits to firms who hire low-income workers. C. gives low-income workers credits on their federal income taxes. D. reduces the tax rate on investment income.
Assume that an increase in a household's disposable income from $40,000 to $48,000 leads to an increase in consumption from $35,000 to $41,000. This means that the household's
A. marginal propensity to save is 0.20. B. marginal propensity to consume is 0.6. C. average propensity to consume is 0.75. D. marginal propensity to consume is 0.75.
All of the following will cause a shift in the supply of wireless earbuds EXCEPT
A. an increase in the cost of producing wireless earbuds. B. a per-unit government subsidy on the production of wireless earbuds. C. a decrease in the number of wireless earbuds manufacturers. D. a decrease in the prices of wireless earbuds.
A government bond is NOT as liquid as cash because the bond
A. cannot be converted to spendable dollars either until it matures or is sold to another investor. B. can be exchanged only for the goods or services produced by the company that issued the bond. C. always has a face value less than its actual value. D. must be exchanged for a stock certificate before it can be converted to spendable funds.