Assume that the government implements a deficit-reduction policy that results in changes in aggregate income and output. Then the Federal Reserve engages in monetary policy actions that reverse the changes in income and output caused by fiscal policy action. Which of the following sets of changes in taxes, government spending, the required reserve ratio, and the discount rate is most consistent with these policies?
(a) Increase / Increase / Decrease / Increase
(b) Increase / Decrease / Decrease / no change
(c) Increase / Decrease / Increase / Decrease
(d) Decrease / Increase / no change / Increase
(e) Increase / Decrease / Decrease / Increase
Ans: (b) Increase / Decrease / Decrease / no change
You might also like to view...
If the government wants to minimize the welfare loss of a tax, it should tax goods with more inelastic demands or supplies
Indicate whether the statement is true or false
When the value of the British pound changes from $1.25 to $1.50, the pound has ________ and the U.S. dollar has ________
A) appreciated; appreciated B) depreciated; appreciated C) appreciated; depreciated D) depreciated; depreciated
An oligopsony exists when
a. a few sellers dominate a market. b. a few buyers dominate a market. c. a single buyer dominates a market. d. a single seller dominates a market.
If the banking system has demand deposits of $100,000, total reserves equal to $15,000, and a required reserve ratio of 10 percent, the banking system can increase the volume of loans by a maximum of
A. $50,000. B. $5,000. C. $85,000. D. $100,000.