A shock to the economy is a change in
a. production that only affects a few sectors
b. production that initially affects the whole economy and then one or more sectors
c. spending or production that initially affects one or more sectors and then spreads throughout the whole economy
d. spending that only affects a few sectors
e. spending that initially affects the whole economy and then one or more sectors
C
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Under the flexible exchange rate, lowering the price of a foreign currency will
A) allow the expansion of monetary policy without causing inflation. B) decrease the foreign country's output. C) prevent a foreign price increase from causing deflation at home. D) cause a home price increase to be exported to the foreign markets. E) cause a "beggar-thy-neighbor" effect.
A decrease in the discount rate by the Federal Reserve causes the money stock to expand
a. True b. False Indicate whether the statement is true or false
Crowding out will be greater
A) the less sensitive consumption spending is to changes in the interest rate. B) the further equilibrium GDP is below potential GDP. C) the more sensitive investment spending is to changes in the interest rate. D) if the economy is in recession, rather than at full employment.
The Fed seeks to promote stability of financial markets because
a. they want to lift the self-esteem of workers b. Congress directed them to do so by the Employment Act of 1946. c. resources are lost when there is not an efficient matching of savers and borrowers. d. unstable markets result in increased efficiency.