Consider the production possibilities frontier displayed in the figure shown. The opportunity cost of a bushel of apples is:

According to the life-cycle hypothesis,

A) the present value of lifetime consumption equals the future value of lifetime income. B) the income earned in a lifetime will be evenly divided between consumption and saving. C) household consumption depends on income that households expect to receive each year, and financial markets are used to smooth consumption in response to changes in transitory income. D) households use financial markets to transfer funds from periods when income is high to periods when income is low.

Answer the following questions true (T) or false (F)

1. The money supply curve will shift to the left if the Federal Reserve buys government securities from commercial banks. 2. Lowering the Federal Reserve fractional reserve requirement ratio will increase the money multiplier. 3. The Federal Reserve can act to reduce a recessionary gap in the nation's product market by lowering income tax rates.