With respect to the demand side, the classical model excludes
a. exogenous changes in investment
b. exogenous changes in government spending.
c. exogenous changes in taxes.
d. exogenous changes in money demand.
e. All of the above
E
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If increased capital usage reduces the firm's short-run demand for labor, then
a. labor is a regressive factor. b. labor and capital are complements in production. c. labor and capital are substitutes in production. d. labor is a Giffen factor.
Answer the next question on the basis of the following consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 10%. All figures are in billions.Assets (billions of dollars)Liabilities & Net Worth (billions of dollars)Reserves$60Checkable deposits$600Securities140Stock shares260Loans260 Property400 Suppose the Fed wants to reduce the money supply by $400 billion to drive up interest rates and dampen inflation. Assuming that the money multiplier is operating to full effect, to accomplish the desired reduction, the Fed could ________.
A. sell $40 billion of U.S. securities to the banks B. buy $40 billion of U.S. securities from the banks C. buy $20 billion of U.S. securities from the banks D. sell $20 billion of U.S. securities to the banks
The arithmetic value of (1 - MPC) equals
A) MPS. B) APS. C) APC. D) NDP.
Quantitative easing by the Fed refers to
A) the creation of bank reserves by engaging in large-scale open market operation at very low interest rates. B) decreasing the money supply during a recession to prevent inflation. C) selling private securities issued by the Fed. D) lowering the federal funds rate while increasing the discount rate. E) lowering the required reserve ratio to zero percent.