Workers with a particular skill are represented by

Assume that GDP = $10,000 and the MPC = 0.75. If policy makers want to increase GDP by 30 percent, and they want to change taxes and government spending by equal amounts, how much would government spending and taxes each need to increase?

A) $300 B) $750 C) $1,000 D) $3,000

In 2008, the Fed created a new policy tool called

A) federal funds zero-rate, which required the Fed to lower the rate to near zero percent. B) open market operations, which required the Fed to buy securities from only the federal government. C) quantitative easing, which required the Fed to pay interest on required reserves. D) interest rate reductions, which allowed the Fed to lower interest rates paid to banks. E) quantitative easing, which allowed the Fed to buy private securities as well as government securities.