If the Federal Reserve wants to prevent a recession, it should ________.
A. decrease the money supply to raise interest rates and lower aggregate demand
B. decrease the money supply to lower interest rates and increase aggregate demand
C. increase the money supply to raise interest rates and lower aggregate demand
D. increase the money supply to lower interest rates and raise aggregate demand
Answer: D
You might also like to view...
Economists who are skeptical about the relevance of "liquidity traps" argue that
a. a central bank continues to have tools to stimulate the economy, even after its interest rate target hits its lower bound of zero. b. a central bank continues to have the option of committing itself to future monetary contraction, even after its interest rate target hits its lower bound of zero. c. a central bank can greatly reduce the likelihood of a liquidity trap by setting the target rate of inflation at zero. d. while the concept of a liquidity trap is theoretically possible, nothing resembling a liquidity trap ever has been observed in the real world.
The effect of budget deficits on interest rates
a. increases private investment, so eventually the capital stock rises. b. increases private investment, so eventually the capital stock falls. c. decreases private investment, so eventually the capital stock rises. d. decreases private investment, so eventually the capital stock falls.
If the rate of interest did not equate saving and investment and total output was greater than total spending, the classical economist argued, competition would tend to force
A. product and resource prices down. B. product prices up and resource prices down. C. product prices up and resource prices up. D. product prices down and resource prices up.
To pursue higher rates of economic growth only when the advantages of the policy outweigh the sacrifices that must be made is an example of the:
A. principle of comparative advantage B. principle of increasing opportunity costs C. scarcity principle D. cost-benefit principle