Suppose there were a large decline in net exports. If the Fed wanted to stabilize output, it could
a. buy bonds to raise interest rates.
b. buy bonds to lower interest rates.
c. sell bonds to raise interest rates.
d. sell bonds to lower interest rates.
b
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According to the fundamental identity of national income accounting, income and output are identical. Why, then, is national income not equal to GDP?
What will be an ideal response?
For a given increase in price, the greater is the elasticity of supply, the greater is the resulting a. decrease in quantity supplied. b. decrease in supply
c. increase in quantity supplied. d. increase in supply.
Suppose the Fed purchases $100 million of U.S. securities from security dealers. If the reserve requirement is 20 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a:
A. $100 million decrease in the money supply. B. $100 million increase in the money supply. C. $200 million increase in the money supply. D. $500 million increase in the money supply.
An economy has no imports or income taxes. The MPC is 0.75 and real GDP is $120 billion. Businesses increase investment by $4 billion. The multiplier is ________ and the change in real GDP from the increase in investment is ________ billion
A) 5; $16 B) 4; $25 C) 0.75; $3 D) 5; $25 E) 4; $16