Answer the following questions true (T) or false (F)
1. An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to decrease the money supply.
2. To complement actions by the Fed to reduce inflation, Congress and the President can cut spending and/or raise taxes.
3. The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises.
1. FALSE
2. TRUE
3. TRUE
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When a firm is at its short-run break-even point
A) economic profits are positive. B) economic profits equal zero and the firm should shut down. C) economic profits equal zero and the firm is earning a nominal rate of return on investment. D) economic profits are negative but the firm should continue to produce because accounting profits are positive.
If an action creates more total benefits for gainers than total harm to losers,
a. that action would be a Pareto improvement. b. taking that action would improve efficiency c. the government should step in to take that action d. a side payment exists that would make the action a Pareto improvement e. any side payment would make the action inefficient