You are the liaison between the Federal Reserve Board and the U.S. Treasury Department. Your goal is to coordinate policy efforts to achieve full-employment output in the economy while keeping a fixed real interest rate
You must recommend tightening or easing both monetary and fiscal policies to do this. What would your recommendation be in each of the following situations? (a) People decide to increase saving. (b) Expected inflation declines. (c) The future marginal productivity of capital declines. (d) There's an adverse oil price shock in which the LM curve moves farther to the left than does the FE line.
(a) Loosen fiscal policy, no change in monetary policy
(b) Ease monetary policy, no change in fiscal policy
(c) Ease fiscal policy, no change in monetary policy
(d) Tighten fiscal policy, ease monetary policy
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In a closed economy, an increase in government spending, while taxes remain the same, will be accompanied by
A) a decrease in private investment and an increase in privates saving. B) an increase in private investment and a decrease in private savings. C) a decrease in private investment only. D) an increase in private savings only.
If the marginal propensity to save (MPS) is 0.10, the value of the spending multiplier is:
a. 1. b. 9. c. 10. d. 90.
Market power refers to the ability of a firm to set its product price
Indicate whether the statement is true or false
Investment, as defined in aggregate expenditure calculations, consists of purchasing all of the following except?
a. new factories b. new housing c. new stocks d. new equipment