If the economy is near full employment and Congress cuts taxes, the proper monetary policy should be
a. expansionary to keep the economy fully employed.
b. expansionary to counteract the increased deficit.
c. contractionary to shift the aggregate demand curve outward.
d. contractionary to counteract the effects of fiscal policy.
d
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If real output and velocity are stable and predictable, then the equation of exchange can be used to derive a simple relationship between: a. the money supply and the price level
b. the money supply and the interest rate. c. the money supply and the foreign exchange rate. d. unemployment and aggregate demand. e. unemployment and nominal GDP.
If a budget deficit increases interest rates, it is possible that investment will
A. fall, leading to a larger capital stock. B. fall, so that there is a smaller capital stock. C. rise, because investment is directly related to interest rates. D. rise, because investment is more attractive when interest rates are higher.
The World Bank defines ________ poverty as an income of less than $1.90 per day per person.
A. extreme B. severe C. relentless D. extraordinary
Compare and contrast the recessionary expenditure gap and the inflationary expenditure gap.
What will be an ideal response?