Changes in government spending and/or taxes as the result of legislation is called:
a. open market operations of the Federal Reserve.
b. discretionary fiscal policy.
c. balanced budget operations.
d. discretionary monetary policy.
b
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The "income effect" in the market for aspirin means that
A) aspirin are generally taken by people with higher than average incomes. B) a decrease in the price of a substitute good like acetaminophen will make aspirin takers feel a little poorer than they were before. C) an increase in the price of aspirin will reduce the total purchasing power of aspirin takers, making them able to afford fewer aspirin. D) an increase in the price of aspirin will cause headache sufferers to look for a lower priced remedy.
________ is the process of researching and developing profitable new products and services by financial institutions
A) Financial engineering B) Financial manipulation C) Customer manipulation D) Customer engineering
The liquidity trap refers to the
A) assumption that the money supply curve is vertical as a result of the Fed's control. B) problem that occurs when interest rates reach such high levels that no individuals want to hold their wealth in the form of money. C) situation that occurs when an excess supply of money results in people holding more money than they desire. D) possibility that interest rates drop so low that people willingly hold all the additions to the money supply, rather than use it to buy bonds.
Exhibit 12-3 Lorenz curve for an economy
If this economy's distribution of income becomes more equal, then the Lorenz curve shown in Exhibit 12-3 will:
A. move closer to the 45° line. B. become more bowed outward. C. lie above the 45° line. D. shift down and to the right.