Whenever fiscal policy actions, such as income tax cuts, are utilized to expand the economy, the Keynesians prefer
a. a contractionary monetary policy.
b. monetary policy to stay the same because of the liquidity trap.
c. accompanying decreases in the money supply that will cause the interest rate to rise and, thus, prevent the crowding out of investment.
d. accompanying increases in the money supply in order to prevent the interest rate from rising and, thus, prevent the crowding out of investment.
e. both b and/or d
C
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Thousands of U.S. banks failed in the 1930s because the Fed loaned too many reserves to member banks
a. True b. False Indicate whether the statement is true or false
Answer the following statements true (T) or false (F)
1. The innovation theory is classified among the real or physical causes of the business cycle. 2. The theory of rational expectations is classified as a psychological cause of the business cycle. 3. The under consumption theory is classified as a real or physical cause of the business cycle. 4. The under investment theory is classified as a monetary cause of the business cycle. 5. In using the GDP as a measure of business cycles, it is best to use real GDP.