In the Keynesian model, suppose the Fed sets a target for the money supply. If the IS curve shifts to the left, and the Fed wants to keep output unchanged, what should the Fed do?
A. Reduce taxes.
B. Increase taxes.
C. Reduce the money supply.
D. Increase the money supply.
Answer: D
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Which of the following is likely to happen if a contractionary monetary policy is adopted?
A) Real wages will fall. B) The aggregate price level will increase. C) Equilibrium unemployment will fall. D) The real interest rate will increase.
The imposition of a tariff will typically ________ government revenue and ________ domestic production of the good
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease E) increase; not change
In November 2008, the Fed began its first round of quantitative easing. In total, the Fed conducted ________ rounds of quantitative easing before ending the program in October 2014
A) 2 B) 3 C) 4 D) 5
Do policy makers know the exact value of the fiscal multiplier?
a. No, economists have almost no idea of the value of fiscal multipliers. b. No, they are not known with complete accuracy. c. Yes, economists know the precise value of the multiplier. d. Yes, although there is a very small range of uncertainty in the value.