When the Fed lowers the discount rate, it makes it:
A. cheaper for banks to borrow from each other.
B. cheaper for banks to obtain additional reserves by borrowing from the Fed.
C. more difficult for banks to accept deposits.
D. more difficult for banks to extend loans.
Answer: B
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The multiplier principle explains how
a. any change in the economy will be magnified. b. $1 invested will increase GDP by more than $1. c. expenditures and incomes increase as investment increases. d. All of the above are correct.
Industrial policy aims to
a. reduce pollution by requiring factories to reduce their pollution by a certain number of tons per year. b. reduce pollution by levying a tax on factories of a certain number of dollars for every ton of pollution that the factory emits. c. encourage business firms to subsidize continuing education for their employees. d. promote technology-enhancing industries.
Which type of tax is used to finance the Social Security program in the United States?
a. consumption tax b. income tax c. payroll tax d. property tax
The consumer price index is used to monitor changes in the cost of living over time.
Indicate whether the statement is true or false.