An open market _______ of $100 million of securities ______
A. purchase; increases bank reserves
B. sale; increases bank reserves
C. purchase; decreases the Fed's liabilities
D. sale; increases the Fed's liabilities
A When the Fed purchases government securities, it effectively pays for (at least part of) the purchasing by increasing banks' reserves.
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During the Great Recession the fiscal policy measures taken to exit the recession was
A. raise taxes and run budget deficits. B. raise taxes and run budget surpluses. C. lower taxes and run budget surpluses. D. lower taxes and run budget deficits.
Suppose policy makers implement an unexpected fiscal expansion. Further assume that monetary policy is expected to keep interest rates constant in response to this unexpected fiscal expansion. Given this information, we would expect that
A) stock prices will rise. B) stock prices will remain constant. C) this policy will have an ambiguous effect on stock prices. D) the effect on stock prices will depend on the slope of the IS curve.
John Maynard Keynes explained that the consumption function is a major component of the aggregate expenditures model
a. True b. False Indicate whether the statement is true or false
The Scarcity Principle tells us ________, and the Cost-Benefit Principle tells us ________.
A. how to make choices; that choices must be made B. that choices must be made; how to make good choices C. that good choices eliminate scarcity; how to make good choices D. how to make good choices; that choices involve costs and benefits