The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of
a. the Board of Governors.
b. the FOMC.
c. the regional Federal Reserve Bank presidents.
d. the U.S. Treasury.
b
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An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes
Indicate whether the statement is true or false
If the Fed decreases the monetary base by $100 million and the money multiplier is 4, M1 will
A) rise by $400 million. B) fall by $400 million. C) rise by $25 million. D) fall by $25 million.
If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be:
A. elastic. B. unit elastic. C. perfectly elastic. D. inelastic.
Resources are efficiently allocated when production occurs at that output at which:
A. P equals MR B. P equals AVC C. P exceeds MR D. P equals MC