Structures in the economy increase aggregate demand when the economy is in recession and decrease aggregate demand when the economy is inflationary are known as:
a. tax transfers.
b. inventory investment.
c. accelerators.
d. depreciation.
e. automatic stabilizers.
e
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Unemployment in 1939, after a decade of recession and depression, still exceeded 10 percent
Indicate whether the statement is true or false
A decrease in government purchases or an increase in taxes, other things being equal, will tend to:
a. increase interest rates and decrease investment as a result. b. increase interest rates and increase investment as a result. c. decrease interest rates and decrease investment as a result. d. decrease interest rates and increase investment as a result.
Which of the following correctly describes the time-inconsistency problem?
a. The problem that arises when policy makers have an incentive to announce one policy to influence expectations, but then pursue different policy once those expectations have been formed and acted on. b. The problem that arises when the president and Congress have an incentive to pursue policies that are different from those of the Fed. c. The problem that arises when consumer preferences change frequently over time such that a product considered highly desirable at one point would be considered undesirable after sometime. d. The problem that arises when firms increase supply of a product in anticipation of future increase in demand for the product, but suffers a heavy loss because of a steep fall in demand.
Which group votes on the open-market operations that are used to control the U.S. money supply and interest rates?
A. The 12 Federal Reserve Banks. B. The Federal Reserve System. C. The Board of Governors of the Federal Reserve System. D. The Federal Open Market Committee (FOMC).