An increase in the supply of money, other things being equal, will raise the equilibrium interest rate.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 2Recovery is the phase of the business cycle during which real GDP reaches its maximum.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3If the economy is experiencing unemployment, then the most appropriate government policy would be to:
a. shift the aggregate demand curve by using a tax increase coupled with spending cuts.
b. shift the aggregate demand curve by using a tax increase coupled with more spending.
c. shift the aggregate demand curve by using a tax cut coupled with spending cuts.
d. shift the aggregate demand curve by using a tax cut coupled with more spending.
e. shift the aggregate supply curve by using a tax cut coupled with spending cuts.
QUESTION 4When there is an excess demand for money, individuals and businesses will attempt to purchase bonds.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 5The four phases of a single business cycle are, in order, the trough, followed by a recovery, then a recession, ending with a peak.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by 1,000 billion and cause inflation. If the marginal propensity to consume (MPC) is 0.80, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:
a. government spending by 200 billion.
b. taxes by 100 billion.
c. taxes by 1,000 billion.
d. government spending by 1,000 billion.
QUESTION 7Bond prices and interest rates are directly related.
a. True
b. False
Indicate whether the statement is true or false
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