Suppose real GDP is $13 trillion, potential real GDP is $13.5 trillion, and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP. Assuming a constant price level, Congress and the president would need to
decrease taxes by
A) $500 billion.
B) less than $500 billion.
C) more than $500 billion.
D) None of the above are correct. Congress should raise taxes in this case.
Answer: B
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Which of the following is not an example of a market?
A. An auction B. Grocery store C. Donation center D. EBay
Which statement is true?
A. There was brief depression in the early 1920s. B. Between 1921 and 1929 national output tripled. C. The automobile market was completely saturated by 1921 and sales remained low for the rest of the decade. D. None of these statements are true.
The ________ states that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries
A) theory of purchasing power parity B) law of one price C) theory of money neutrality D) quantity theory of money
The concept of "lender of last resort" is that when
a. lending decreases, the Fed will be the last to resort to higher interest rates. b. borrowing increases, the Fed will be the last to increase lending. c. commercial banks are hesitant to lend, the Fed will step in and increase reserves. d. a borrower has tried everyone else, the Fed will lend directly to them.