Critically evaluate the following statement made in favor of the sub-prime loan bailout of mortgage companies who made high interest rate loans to marginal credit-worthy customers
"The government should do everything within its powers to prop up ailing lenders and homeowners, just as they've done in the past with other troubled industries, from airlines to savings and loans"
Bailing out mortgage companies and banks that have engaged in risky behavior may encourage the same kind of behavior in the future.
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
The "V" in the equation of exchange MsV = PY refers to
A) the velocity of inflation. B) a variable. C) income velocity of money. D) a vector that links P to Y.
An increase in taxes shifts the
a. aggregate supply curve outward. b. aggregate demand curve outward. c. consumption schedule upward. d. consumption schedule downward.
The Federal Open Market Committee (FOMC)
A) has six members. B) conducts open market operations. C) is the policy-making body within the Treasury. D) is the governing body of the Federal Reserve System. E) a, b, and c