An upward shift in the Fed's reaction function is equivalent to:
A. an increase in the Fed's long-term target for inflation.
B. a decline in the Fed's long-term target for inflation.
C. a downward shift of short-run aggregate supply
D. an upward shift of short-run aggregate supply
Answer: B
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Assume there is no foreign trade, the government sector has a balanced budget, and the economy is in equilibrium. If actual investment is greater than desired investment, then it is most likely that
A. Investment plus government spending is greater than saving plus taxes. B. Saving plus taxes is greater than investment plus government spending. C. Investment plus taxes is greater than saving plus government spending. D. Saving plus government spending is greater than investment plus taxes.
M1 differs from M2 in that:
A. M2 includes savings deposits, small-denomination time deposits, and money market mutual funds that are not included in M1. B. M1 includes currency and balances held in checking accounts, which are not included in M2. C. the assets in M2 are more liquid than the assets in M1. D. M1 is a broader measure of the money supply than M2.