If congress and the federal reserve bank both wished to encourage growth of productive capacity in an economy already close to full employment, it would be most appropriate to
a) increase interest rates by buying bonds on the open market
b) use a tight money policy to decrease government spending
c) reduce taxes on consumption, increase income taxes, and increase government transfer payments
d) reduce interest rates by engaging in open market operations and raise taxes on personal income
e) increases capital gains taxes and decrease the money supply
Ans: d) reduce interest rates by engaging in open market operations and raise taxes on personal income
You might also like to view...
A change in government spending has a larger effect on income the
a. larger the elasticity of money demand. b. smaller the elasticity of money demand. c. steeper the LM curve. d. flatter the LM curve.
Social Security is used to redistribute income.
A. True B. False C. Uncertain
If the economy is to the left of the potential GDP, what is the economy experiencing?
a. Frictional unemployment b. Natural unemployment c. Cyclical unemployment d. Structural unemployment
Suppose that MPL = 20 and MPK = 21. If W = 10 and R = 11, then a firm:
A. is producing its output at the lowest possible cost. B. could reduce costs by employing more labor and less capital. C. could reduce costs by employing more capital and less labor. D. could minimize costs by employing more of both inputs.