If the Fed allows the federal funds rate to fall well below the rediscount rate it is likely that the Fed will
A) lower the rediscount rate and increase c, the proportion of demand deposits held as cash.
B) raise the rediscount rate.
C) increase loans to banks.
D) decrease loans to banks.
D
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
If the cross elasticity of demand between Jeep Cherokees and Chevy Lumina Vans is 1.55, then the two vehicles are not substitutes in the eyes of car buyers
Indicate whether the statement is true or false
Crowding out results when an increase in government spending leads to declines in consumption, investment, and/or net exports
Indicate whether the statement is true or false
The long-run supply curve would be perfectly elastic when:
A. An increase in demand does not cause a change in product price B. An increase in demand causes an increase in product price C. A decrease in demand causes an increase in short-run supply D. A decrease in demand causes an increase in product price