The "indirect effect" of an increase in the money supply is to
A) increase aggregate demand as people try to spend their excess money balances.
B) increase aggregate demand as interest rates fall and investment spending increases.
C) increase aggregate supply as firms anticipate future profits.
D) decrease the price level.
B
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Payments to households that do not require anything in exchange are called
A) transfer payments. B) government purchases. C) consumption expenditures. D) investment expenditures.
Which of the following statements about inflation targeting is true?
A) Inflation targeting would not reduce the flexibility of monetary policy to address other policy goals. B) Inflation targeting by the central banks in other countries has not typically lowered inflation. C) Inflation targeting would make it easier for households and firms to form accurate expectations of future inflation, improving their planning and the efficiency of the economy. D) Inflation targeting would not allow the central bank the flexibility to take action against a severe recession.