Explain whether a fiscal policy that causes an increase in current and future government spending can cause a reduction in current output
What will be an ideal response?
Current output could fall. The increase in G will cause the IS curve to shift to the right. The increase in future G will cause an increase in future output which will also shift the IS curve to the right. The increase in future rates, however, will cause current demand to fall and shift the current IS curve to the left. If these effects dominate (or if the Fed is expected to contract in the future), Y could fall in the current period.
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Which of the following is a thrift institution?
i. a credit union ii. the Fed iii. a savings bank A) i only B) ii only C) iii only D) Both i and iii E) i, ii, and iii
In general, banks make profits by selling ________ liabilities and buying ________ assets
A) long-term; shorter-term B) short-term; longer-term C) illiquid; liquid D) risky; risk-free
An option premium is
A) paid by the short to the long as soon as the option is purchased. B) paid by the long to the short as soon as the option is purchased. C) paid by the long to the short when the option is exercised. D) paid by the short to the long when the option is exercised.
Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-n-cheese is $1, and the price of one CD is $12 . If she has $200 of income, she could choose to consume
a. 30 boxes of mac-n-cheese and 12 CDs. b. 40 boxes of mac-n-cheese and 14 CDs. c. 20 boxes of mac-n-cheese and 16 CDs. d. 60 boxes of mac-n-cheese and 12 CDs.