If credit card balances rise in the economy, then M1 will ________ and M2 will ________
A) increase; increase
B) not change; increase
C) decrease; increase
D) not change; not change
E) increase; decrease
Answer: D
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A major factor in determining the rational expectation of inflation is
A) the size of the budget deficit. B) forecasts of the Fed's monetary policy. C) forecasts of fiscal policy. D) the previous month's unemployment rate. E) the recent past behavior of the stock market.
When economists say that policy A is more efficient than policy B, they mean policy A is better than policy B.
Answer the following statement true (T) or false (F)
Crowding out refers to a decline in ________ as a result of an increase in ________
A) government purchases; private expenditures B) government purchases; tax rates C) private expenditures; government purchases D) tax revenues; unemployment
Using economic efficiency as the standard, most economic models imply that ________ when trying to reduce the debt
A) increasing taxes is preferable to reducing government expenditure B) reducing government expenditure is preferable to increasing taxes C) increasing taxes is equally efficient as reducing government expenditure D) reducing government expenditure is no more effective than increasing taxes