In the ISLM framework a contractionary fiscal policy causes aggregate output to ________ and the interest rate to ________, everything else held constant
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
C
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Which of the following statements is true?
A) If households expect higher taxes in the future, they will decrease their current savings rate. B) The savings rate of households is dependent only on current consumption expenditure. C) The savings rate of households is dependent only on consumption expenditure planned for the future. D) If households expect higher taxes in the future, they will increase their current savings rate.
In monopolistic competition, in the long run firms produce
A) less output than that which minimizes their ATC. B) more output than that which minimizes their ATC. C) the amount of output that minimizes their ATC and their AVC. D) the amount of output that minimizes their ATC but not their AVC.
The Fed is institutionally independent. A major advantage of this is that monetary policy
a. is subject to regular congressional scrutiny. b. will often offset fiscal policy. c. is not controlled by politicians. d. is usually coordinated with fiscal policy.
Which of the following statements is positive?
A. Higher taxes are needed to support education. B. Large budget surpluses should be avoided. C. A tax cut that benefits high-income households is acceptable. D. Tax increases tend to discourage saving.