ECO 202 Exam 2
When the economy is in long-run macroeconomic equilibrium
-SRS=AD=LRAS -total unemployment= frictional + structural unemployment -actual GDP = potential GDP
Policy goals of the federal reserve banks incldue
-Stable financial markets -Low unemployment -Higher living standards
Functions of money include
-Store of value -Medium of exchange -Unit of account
Which of the following factors brought on the recession of 2007-2009?
-The end of the outing bubble -The financial crisis -A rapid increase in the price of oil (all of the above)
Which of the following is not one of the monetary policy goals of the Federal Reserve ("the Fed")?
A high foreign exchange rate of the US dollar relative to other currencies
Which of the following is NOT a correct statement about M2?
M2 is the best definition of money as a medium of exchange
Which can be changed more quickly: monetary policy or fiscal policy?
Monetary policy can be changed more quickly than fiscal policy. Monetary policy can be changed at any of the FOMC meetings and the smaller number of individuals involved makes it easier to change policy.
Which of the following is included in M2 but not M1?
Money Market deposit accounts in banks
What did Geithner mean by the "non-bank financial system"?
Money Market mutual funds, hedge funds and other financial firms that raise money from investors and provide it to firms and households
What is the disadvantage of holding money?
Money in the form of currency or checking account deposits earns either no interest or a very low rate of interest
Changes in taxes and spending that happen without any actions by the government are called
automatic stabilizers
Why does the failure of workers and firms to accurately predict the prices level result in an upward-sloping aggregate supply curve?
because the contracts between workers and firms make some wages and prices "sticky", because menu costs make some prices "sticky" and because firms are often slow to adjust wages. (all of the above)
The largest and fastest-growing category of federal expenditure is
transfer payemtns
When the economy is experiencing an expansionan expansion automatic stabilizers will cause:
transfer payments to decrease and tax revenues to increase
If coins could have been used to purchase goods and services in other areas, the coins would also have some intrinsic value
true
If the Fed believes the inflation rate is about to increase it should
use a contractionary monetary policy to increase the interest rate and shift AD to the left
If the Fed believes the economy is about to fall into recession it should
use an expansionary monetary policy to lower the interest rate and shift AD to the left
When the Federal Open Market Committee (FOMC) decides to increase the money supply, it _______ U.S. Treasury securities. If the FOMC wishes to decrease the money supply, it _______ U.S. Treasury securities.
buys; sells
An initial decrease in the bank's reserves will decrease checkable deposits
by an amount greater than the decrease in reserves
Which of the following is not a policy tool the Federal reserve uses to manage the money supply?
changing income taxes
The Fed's strategy of increasing the money supply and lowering interest rates in order to increase real GDP is called
expansionary monetary policy
The interest rate that the banks charge each other for overnight loans is called the
federal funds rate
The US dollar can best be described as
fiat money
If you move $100 from your savings account to your checking account, then M1 will
increase by $100 and M2 will remain the same
The Feral Reserve Bank of New York is always a voting member of the FOMC because
it carries out the policy directives of the FOMC
The federal government would not want to increase its spending, even if the result were to increase real GDP and employment in the short run, if
it would lead to a greater federal deficit and an increase in the national debt
If the economy grows into a recession, monetarists argue that the Fed should
keep the money supply growing at a constant rate
Checking account deposits are the
largest portion of the M1 money supply.
The federal government's day-to-day activities include running federal agencies like the Environmental Protection Agency, the FBI, the National Park Service, and the Immigration and Customs Enforcement. Spending on these types of activities make up
less than 10 percent of federal government expenditures
As a result of crowding out LOADING... in the short run, the effect on real GDP of an increase in government spending is often
less than the increase in government spending
When interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is _________, so the quantity of money demanded will be _________.
low; high
Suppose you withdraw $1,000 from a money market mutual fund and deposit the funds in your bank checking account. How will this action affect M1 and M2?
m2 will not be effected but M1 will increase
When sellers are willing to accept money in exchange for goods and services, money is acting as a
medium of exchange
An increase in government purchase and a faster income growth in other countries will cause a
rightward shift of the US aggregate demand curve
Which of the following refers to the minimum fraction of deposits banks that are required to keep by law to keep as reserves
the required reserve ratio
The position of the long-run aggregate supply curve is determined by
the number of workers, the amount of capital and the available technology
One of the goals of the Federal Reserve is price stability. For the Fed to achieve this goal,
the rate of inflation should be low, such as 1% to 3% and should be fairly consistent
when the federal reserve purchases treasury in the open makret
the sellers of such securtiries deposit the finds in their banks and bank reserve increases
The quantity theory of money is better able
to explain the inflation rate in the long run
When Congress established the Federal Reserve in 1913, its main responsibility was
to make discount loans to banks suffering large withdrawals by depositors
The wealth effect refers to the fact that
when price level falls, the real value of household wealth rises and so will consumption
According to the AD-AS model, what is the most common cause of inflation?
-Total Spending increases faster than total production -AD increase by more than LRAS -The US mint prints too much currency
Which of the following is true with respect to Irving Fisher's quantity equation, M x V = P x Y
-V= the average number of times a dollar is spent on goods and services -M= M1 definition of the money supply -P= the GDP deflator -Y = real GDP - V= (P x Y) /M (all of the above)
The aggregate demand curve slopes downward because
-a lower price level makes US exports less expensive, thereby increasing net exports -a lower price level decreases the rate of interest, which increases private investment and consumption -a lower price level increases the real wealth of households, thereby increasing household consumption
The aggregate demand curve slopes downward for all of the following reasons EXCEPT
-a lower price level makes imports from other countries less expensive, and US citizens buy more imports
The SRAS curve will shift to the left if
-an increase in the expected price of an important natural resource -an increase in the adjustment of workers and firms prior underestimation of the price level -increase in expected future prices
The Aggregate Demand Curve (AD) would shift to the right if there was a
-decrease in taxes, -decrease in the US exchange rate relative to other currencies -lower interest rates -increased consumer optimism
The (FOMC) Federal Open Market Committee
-determines the target federal funds rate and the direction of open market operation policies. -includes the Board of Governors and the presidents of the 12 Federal Reserve regional banks (though not all are voting members). -makes decisions that are voted on by all 7 members of the Board of Governors but only 5 of the 12 regional bank presidents. (all of the above)
Why does the SRAS curve slope upward?
-firms and workers fail to predict the changes in price level -contracts keep wages "sticky" -Prices of final goods rise more quickly than the prices of inputs (all of the above)
Aggregate demand (AD) is comprised of expenditure components that include
-government spending -consumption, -investment -net exports
The following are true in regards to hyperinflation
-in the presence of hyperinflation, firms and households avoid holding money -it can be hundreds or even thousands of percentage points per year -it is caused by central banks increasing the money supply at a rate much greater than that growth rate of real GDP (all of the above)
Which of the following factors will cause the long-run aggregate supply curve to shift to the right?
-technological change -an increase in the number of workers in the economy -the accumulation of more equipment and machinery (all of the above)
The aggregate demand curve slopes downward due to
-the wealth effect -the interest-rate effect -the international-trade effect -the international-trade effect
The SRAS will shift to the right if
-there is a positive technological change -increase in the labor force -increase in productivity
The SRAS will shift to the left if
-there is an increase in the expected price of an important natural resource -a higher expected future price level -a decrease in capital stock
The SRAS curve will shift to the right when
-there is an increase in the labor force or capital accumulation -an increase in productivity -a technological change
What is price deflation?
A fall in the price level
Why would deflation cause "shoppers to hold back," and what does Evans-Pritchard mean when he says, "Once this psychology gains a grip, it can gradually set off a self-feeding spiral that is hard to stop"?
Consumers delay purchases, expecting prices to fall more and the lack of demand causes prices to fall further
In addition to the Federal Reserve Bank, what other economic actors influence the money supply?
Households, firms and banks
Which of the following statements is true?
In the long run, changes in the price level of not affect the level of real GDP
What is a "classic type of run"?
Many depositors simultaneously decide to withdraw money from the bank.
A movement from point A to B along the Aggregate demand curve could be the result of
a change in the price level
The international trade effect refers to the fact that an increase in the price level will result in
a decrease in exports and an increase in imports
If the economy adjusts through the automatic mechanism, then a decline in the aggregate demand causes
a recession in the short run and a decline in the price level in the long run
An increase in state income taxes and interest rates will cause
a rightward shirt of the aggregate demand curve
Which is usually the cause of stagflation?
a supply shock as a result of unexpected increase in the price of a natural resource
The aggregate demand curve is downward sloping because
an increase in the price level reduces real money holdings, which reduces the amount of expenditures
How does the dynamic model of a aggregate supply and aggregate demand explain inflation?
by shadowing that if total spending in the economy grows faster than total production, prices will rise
How does the dynamic model of aggregate supply and aggregate demand explain inflation?
by showing that if total spending in the economy grows faster than total production, prices will rise
The amount of US currency outstanding averages to about 2800 per person in the US. This large amount of currency per person can be panically explained because
many US dollars are held outside of the country by foreigners
The aggregate demand curve shows the relationship between the
price level and the output demanded
increase in the value of the dollar relative to foreign currencies will make the aggregate demand curve
shift to the left
A change in consumption will cause a (Federal Government will increase taxes in an attempt to reduce a budget deficit)
shift to the left in the aggregate demand curve
A technological change will cause the long-run aggregate supply (LRAS) curve to
shift to the right
A change in investment will cause a (Firms become more optimistic and increase their spending on machines and equipment)
shift to the right in the aggregate demand curve
When the Federal Reserve sells Treasury securities in the open market
the buyers of these securities pay for them with checks and the banks reserves fall
On a downward sloping Aggregate Demand Curve (AD) a movement along the line would be the result of
the wealth effect or the interest rate effect
The Short-Run Aggregate Supply curve shifts from the right to the left if
there is an increase in the expected price of an important natural resource or an increase in the expected future price level
The Short-Run Aggregate Supply curve shifts from the left to the right if
there is an increase in the labor force or capital stock or there is an improvement in technology
Which of the following are categories of federal government expenditures?
-Grants to state and local governments -interest on the national debt -transfer payments (all of the above)
The following statements are correct about M2
-M2 includes savings accounts, small-donation time deposits and money-market mutual funds -M2 includes all the assets in M1 -M2 is a broader definition of money compared to M1 and currency
Suppose that velocity is 3 and the money supply is $600 million. According to the quantity theory of money, nominal output equals
$1.8 billion
Suppose the reserve requirement is 15%. What is the effect on total checkable deposits in the economy if bank reserves increase by $40 billion.
$267 billion increase
Suppose that Deja owns a McDonald's franchise. She decides to move her restaurant's checking account to Wells Fargo, which causes the changes shown on the following T-account. Wells Fargo Assets Liabilities Reserves +$100,000 Deposits $100,000. If the required reserve ratio is 15% and Wells fargo has no excess reserves, The maximum loan Wells Fargo can make as a result of this transaction is
$85000
Which of the following is a monetary policy tool used by the Federal Reserve Bank?
-Buying 500 mil worth of government securities such as Treasury bills -Decreasing the rate at which banks can borrow money from the federal reserve -increasing the reserve requirement from 10 percent to 12.5 percent (all of the above)
M1 money supply equals
-Currency and coin held by the public -Checking account balances -Travelers Checks (1510)
Which of the following are tools the Federal reserve uses to manage money supply?
-Discount policy -open market operations -Reserve Requirements
The use of money
-reduces the transaction costs of exchange -eliminates the double coincidence of wants -allows for greater specialization (all of the above)
An article in the Wall Street Journal reported in 2015 that the People's Bank of China, which is the central bank of China, "is freeing up cash by reducing the amount that banks must keep in reserve." Source: Lingling Wei, "China Central Bank Checks Europe Playbook on Credit," Wall Street Journal, April 19, 2015. -The monetary policy tool that the People's Bank of China was using was changes to the -This policy change would "free up cash" because -The peoples bank of china was hoping this policy action would
-required reserve ratio -reserves that were required are now excess reserves available for lending -stimulate economic growth
Suppose that the Federal Reserve makes a $10 million discount loan to First National Bank (FNB) by increasing FNB's account at the Fed. Complete the following T-account to show the impact of this transaction. Assume that before receiving the discount loan, FNB had no excess reserves LOADING... . The maximum amount of the $10 million that FNB can issue in loans is $10 million. Assume that the required reserve ratio is 10%. The maximum total increase in the money supply that can result from the Fed's discount loan is
100 million
Which of the following is an example of an expansionary fiscal policy?
A decrease in taxes
Which of the following is an example of an expansionary fiscal policy?
A decrease in taxes and a shift from left to right of the aggregate demand curve
When the Federal Reserve increases the discount rate as a part of a contradictory monetary policy, there is:
A decrease in the money supply and increase in the interest rate
Suppose the economy is initially in long-run equilibrium at point A. The government decides to decrease government spendingdecrease government spending. In the short-run, this contractionary fiscal policy will cause:
A shift from AD 2AD2 to AD 1AD1 and a movement to point D, with a lower price level and lower output.
Suppose the economy is initially in long-run equilibrium. The Fed enacts a policy to decrease the discount ratedecrease the discount rate. In the short-run, this expansionary monetary policy will cause:
A shift from AD1 to AD2 and a movement to point B, which higher price level and higher output
Which of the following is not true in terms of potential long run impacts of tax policies?
A tax rebate given one year will cause people to have more money and therefore they will spend more which will cause an increase in aggregate supply.
Functions of Money do not include
Acceptability
The figure to the right illustrates the economy using the Dynamic Aggregate Demand and Aggregate Supply Model LOADING... If actual real GDP in 2006 occurs at point B and potential GDP occurs at LRAS 06LRAS06, we would expect the Federal Reserve Bank to pursue a contractionary monetary policy. If the Fed's policy is successful, what is the effect of the policy on the following macroeconomic indicators?
Actual real GDP decreases . Potential real GDP does not change . Price level decreases . Unemployment increases
If the Fed's policy is successful, what is the effect on the following indicators?
Actual real GDP: increases Potential real GDP: does not change Price level: increases Unemployment: decreases
The effect of a change in the federal funds rate on long-term interest rates is usually smaller than it is on short-term interest rates. B. A majority of economists support the Fed's choice of the interest rate as its monetary policy target, but some economists believe the Fed should concentrate on the money supply instead. C. Changes in the federal funds rate usually will result in changes in both short-term and long-term interest rates on financial assets.
All of the above are true
Which of the following, if true, will support Robin's Argument?
Almora's agriculture and manufacturing sectors have become less competitive in the world market
Suppose that at the same time Congress and the president pursue an expansionary fiscal policy, the Federal Reserve pursues an expansionary monetary policy. How might an expansionary monetary policy affect the extent of crowding out in the short run?
An expansionary monetary policy would decrease interest rates and this reduce the extent of crowding out
What is meant by Professor Spencer's statement "This printing of money 'will keep the [deflation] wolf from the door'"?
An increase in the money supply exceeds the rate of growth of GDP will increase the price level
How does an increase in the price level affect the quantity of real GDP supplied in the long run?
Changes in the price level do not affect the GDP in the long run
What is a contradictory fiscal policy?
Contradictory fiscal policy includes decreasing government spending and increasing taxes to decrease aggregate demand
What is meant by crowding out?
Crowding out is a decline in private expenditures as a result of increases in government purchases
The largest liability of a typical bank is
Deposits
Do you agree or disagree with the following statement? "I recently read that more than half of the money issued by the government is actually held by people in foreign countries. If that's true, then the United States is less than half as wealthy as the government statistics indicate."
Disagree. Money is currency plus checking deposits, wealth is the value of assets minus debt
Which of the following best explains how the economy will adjust from the short-run equilibrium point to the new long-run equilibrium point?
Due to the higher price level, workers will demand higher wages, and firms will raise prices and cause the SRAS to shift to he left to point C
What is an expansionary fiscal policy?
Expansionary fiscal policy includes increasing government spending and decreasing taxes to increase aggregate demand.
During 2005, the FOMC was concerned that the inflation rate would begin to accelerate due to the continued boom in the housing market, so the Fed started decreasing the target for the federal funds rate.
False
The multiplier effect is only a consideration for increases in government purchases.
False
Evaluate the following statement: Banks use deposits to make consumer loans to households and commercial loans to businesses. Banks will loan out every penny of their deposits in order to make a profit.
False. Banks must hold a fraction of their deposits as vault cash or with the Federal Reserve
Suppose that the economy is currently at potential GDP, and the federal budget is balanced. If the economy moves into recession, what will happen to the federal budget?
If the budget is balanced at potential GDP and the economy moves into a recession, then there will have been a budget deficit as government expenditures increase and tax revenues decrease
What changes should they make if they decide a contractionary fiscal policy is necessary?
In this case, Congress and the president should enact policies that decrease government spending and increase taxes.
If Congress and the president decide an expansionary fiscal policy is necessary, what changes should they make in government spending or taxes?
In this case, Congress and the president should enact policies that increase government spending and decrease taxes.
What actions can Congress and the president take to move the economy back to potential GDP?
Increase government spending or decrease taxes
What is the advantage of holding money?
It can be used to buy goods, services, or financial assets
What do economists mean by the demand for money?
It is the amount of money-currency and checking account deposits-that individuals hold
Which of the following is NOT a monetary policy goal of the Federal Reserve bank (The FEd)?
Low prices
Consider the figure to the right. Can the Fed achieve a $900 billion money supply (MS) AND a 5% interest rate (point C)?
No, the fed cannot target both the money supply and the interest rate simultaneously
Suppose the economy is in equilibrium in the first period at point A. In the second period, the economy reaches point B. What policy would the Fed likely pursue in order to move AD 2AD2 to AD Subscript 2 comma policyAD2, policy and reach equilibrium (point C) in the second period?
Open market purchase of government securities
Why does the short-run aggregate supply curve slope upward?
Profits rise when the prices of the goods and services firms sell rise more rapidly than the prices they pay for inputs.
Year Potential Real GDP Real GDP Price Level 2016 $18.0 trillion $18.0 trillion 150 2017 18.5 trillion 18.8 trillion 154 Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2016 and in 2017 if the Federal Reserve does not use monetary policy. If the Fed uses monetary policy successfully to keep real GDP at its potential level in 2017, which of the following will be lower than if the Fed had taken no action?
Real GDP and the inflation rate
Why would deposit insurance provide the banking system with protection against runs?
Since most depositors are insured, it is less likely that panicked buyers will simultaneously withdraw funds.
As the figure to the right indicates, the Fed can affect both the money supply and interest rates. However, in recent years, the Fed targets interest rates in monetary policy more often than it does the money supply. Which interest rate does the Fed target?
The federal Funds Rate
Why would the Fed intentionally use contractionary monetary policy to reduce real GDP?
The Fed intends to reduce inflation, which occurs if real GDP is greater than potential GDP
Consider the following table: Year Potential GDP Real GDP Price Level 2012 $14.914.9 trillion $14.914.9 trillion 110 2013 $15.3 trillion $15.215.2 trillion 112112 What can we expect from the Federal Reserve Bank if it seeks to move the economy in the direction of long-run macroeconomic equilibrium?
The Fed will pursue an expansionary monetary policy
Who is responsible for fiscal Policy?
The Federal Government controls fiscal policy
What is the cyclically adjusted budget deficit or surplus?
The cyclically adjusted budget or deficit or surplus in the federal governments budget if the economy were at potential GDP
Which of the following, if true, will support Eric's view?
The economy of Northbay is expected to grow at a remarkable pace of 9 percent in the upcoming year.
Which of the following, if true, will strengthen Jim's claim?
The gap between the earnings of college graduates and non graduates is increasing
Why might cutting government spendingcutting government spending as a fiscal policy be a more difficult policy than the use of monetary policy to slow down an economy experiencing inflation?
The legislative process experiences longer delays than monetary policy
What are the Fed's main monetary policy targets?
The money supply and the interest rates
According to the quantity theory of money, inflation results from which of the following?
The money supply grows faster than real GDP
Explain whether you agree with this argument: If the Fed actually ever carried out a contractionary monetary policy, the price level would fall. Because the price level has not fallen in the United States over an entire year since the 1930s, we can conclude that the Fed has not carried out a contractionary policy since the 1930s.
The statement is false. A contradictory policy could result in lower rates of inflation rather than a fall in the price level
Consider the following statement: "The Fed has an easy job. Say it wants to increase real GDP by $200 billion. All it has to do is increase the money supply by that amount."
This statement is incorrect because an increase in the money supply does not affect the real GDP directly
Velocity is defined as
V=(P × Y)/M.
When is it considered "good policy" for the government to run a budget deficit?
When borrowing is used for long-lived capital goods
Which of the following is NOTTT true when the economy is in macroeconomic equilibrium?
When the economy is at long-run equilibrium, firms will have excess capacity.
Does government spending ever reduce private spending
Yes, due to crowding out
Suppose you withdraw $100 in cash from your checking account. Which one of the following choices reflects the transaction on the banks balance sheet?
Your banks balance sheet shows a decrease in reserves by $100 and a decrease in deposits by $100.
fractional reserve banking system, what is the difference between a "bank run" and a "bank panic"
a bank run involves one bank and a bank panic involves many banks
A shift from left to right of the Aggregate demand curve could be the result of
a change in expectations of households
A movement along the SRAS from point A to point B (along one line) could be the result of
a change in the price level
President Trump was assuming that in 2017, the economy was
able to create more jobs and expand without increasing the inflation rate
If the economy is initially at full-employment equilibrium, then an increase in aggregate demand causes
an increase in real GDP in the short run and an increase in the price level in the long run
When actual GDP is below potential GDP the budget deficit increases because of:
an increase in transfer payments and a decrease in tax revenues
Reserve requirements are changed infrequently because
banks set long-term policy decisions, loan decisions and deposit based on the reserve requirements.
Fiscal policy
can be described as changes in government spending and taxes to achieve more macroeconomic policy objectives
The demand curve for an individual product sloped downward
due to consumers substituting the more expensive product for cheaper goods
From an initial longminus−run macroeconomic equilibrium, if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than longminus−run aggregate supply, then the Federal Reserve would most likely
decrease interest rates
If the government cuts taxes in order to increase aggregate demand, the action is called a
discretionary fiscal policy
A change in price level
does not cause the AD curve to shift (movement along)
The interest rate effect refers to the fact that a higher price level results in
higher interest rates and lower investment
Credit cards are
included in neither the M1 definition of the money supply nor the M2 definition
The list of the determinants of potential GDP is
incorrect since changes in the expected price level affect short run aggregate supply but not the long run aggregate supply
With an expansionary monetary policy, investment, consumption, and net exports all ________, which results in the aggregate demand curve shifting to the ________, increasing real GDP and the price level.
increase; right
The Federal Reserve cannot affect the price levelthe price level directly; therefore, the Fed typically uses the following as its policy target:
interest rates
The short-term nominal interest rate
is considered the most relevant interest rate when conducting monetary policy
The federal Funds rate
is the rate that banks change each other for short-term loans of excess reserves
A change in price level will cause a (The US economy experiences a 4% inflation)
movement along the aggregate demand curve
An increase in the price level will cause _________________ the aggregate demand curve.
movement up along
Suppose the economy is in equilibrium in the first period at point A. In the second period, the economy reaches point B. What policy would the Fed likely pursue in order to move AD 2AD2 to AD Subscript 2 comma policyAD2, policy and reach equilibrium (point C) in the second period? (What policy will increase the price level and increase actual real GDP?)
open market purchase of government securities
M1 includes more than just currency because
other assets can also be used to make transactions to buy goods and services
A baseball fan with a Mike Trout baseball card wants to trade it for a Giancarlo Stanton baseball card, but everyone the fan knows who has a Stanton card doesn't want a Trout card. Economists characterize this problem as a failure of the
principle of a double coincidence of wants
Which of the following policy tools is the Federal Reserve least likely to use in order to actively change the money supply?
reserve requirements
Increasing government purchases
shifts the AD curve to the right
Congress broadened the Fed's responsibly since
the 1930s as a result of the Great depression
Monetary policy is defined as:
the actions the Federal Reserve takes to manage the money supply and the interest rates
In 2017, in proposing a $1 trillion increase in government spending on infrastructure, President Trump argued that the spending would increase total employment in the United States. Source: Ted Mann and Michael C. Bender, "President Trump to Launch Push for Infrastructure Investment," Wall Street Journal, June 4, 2017. In the short run, increases in federal spending will increase real GDP and employment if
the economy is producing at less than its potential output and has some cyclical unemployment
A double coincidence of wants refers to
the fact that for a barter trade to take place between tow [people, each person must want what the other has.
A movement from point A on one line to point B on the other line of a SRAS curve could be the result of a change in
the labor force
If the price level decreases
the money demand curve shifts to the left
If real GDP increases
the money demand curve shifts to the right
Which of these variables are the main monetary policy targets of the Fed?
the money supply and the interest rates
A decrease in interest rates because of a monetary policy change and a decrease in taxes
would shift the Aggregate demand (AD) curve to the left
Increased government debt can lead to higher interest rates and, as a result, crowding out of private investment spending. In terms of borrowing (debt-spending), what will offset the effect of crowding out in the long run so that government debt poses less of a problem to the economy?
A. Debt-spending on education. B. Debt-spending on highways and ports. C. Debt-spending on research and development.All of the above
