Assume that full-employment real GDP is Y = 1,200 billion, the current equilibrium real GDP is Y = ...

Assume that full-employment real GDP is Y = 1,200 billion, the current equilibrium real GDP is Y = 1,600 billion, and the MPC = 0.8 . In order to bring the economy to a full-employment real GDP,
 a. a recessionary gap must be bridged by increasing aggregate expenditures by 80 billion.
  b. an inflationary gap must be bridged by cutting aggregate expenditures by 80 billion.
  c. nothing is needed to bring the economy into full employment equilibrium.
  d. a recessionary gap must be bridged by increasing aggregate expenditures by 400 billion.
  e. an inflationary gap must be bridged by cutting aggregate expenditures by 400 billion.

QUESTION 2

Although it has considerable political independence, the Fed is legally a branch of the U.S. Treasury Department.
 a. True
  b. False
  Indicate whether the statement is true or false

QUESTION 3

Which of the following distinguishes industrially advanced countries from less-developed countries?
 a. GDP per capita.
  b. Educational attainment of the workforce.
  c. Extent to which capital is technologically advanced.
  d. All of the above.

QUESTION 4

Using the aggregate expenditure-output model, assume the aggregate expenditures (AE) line is above the 45-degree line at full-employment GDP. This vertical distance is called a(n):
 a. inflationary gap.
  b. recessionary gap.
  c. negative GDP gap.
  d. marginal propensity to consume gap.

QUESTION 5

The Federal Funds Committee executes the purchases and sales of government securities decisions of the Federal Reserve.
 a. True
  b. False
  Indicate whether the statement is true or false