When a recession hits, we would expect the government to run a budget deficit by raising the level of its spending or by cutting taxes, or perhaps both. The Fed would be expected to:
A. reduce the required reserve ratio, increase the discount rate, and buy securities on the open market.
B. reduce the required reserve ratio, reduce the discount rate, and sell securities on the open market.
C. reduce the required reserve ratio, reduce the discount rate, and buy securities on the open market.
D. increase the required reserve ratio, reduce the discount rate, and sell securities on the open market.
Answer: C
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Since 1960, the only period of several years when the full-employment government budget deficit was negative (that is, there was a full-employment surplus) was
A) from 2000 to 2005. B) the late 1990s and early 2000s. C) the mid-1980s. D) the early 1970s.
If firms were teams then there would be a problem of
A) free-riding. B) spontaneous order. C) market-based management. D) internal externalities.
If the long-run aggregate supply curve is vertical, fiscal policy will have no effect on output.
Answer the following statement true (T) or false (F)
If two economists completely agree about the magnitude of employment effects of a proposed change in government policy, but disagree about whether the change is a good idea. The difference in opinion
a. must be normative in nature b. is both positive and normative in nature c. is more likely to be normative than positive d. is more likely to be positive than normative e. would be neither positive nor normative in nature