In the 1990s the United States eliminated its budget deficit and expanded the money supply. This should have led to
a. lower real interest rates and a depreciation of the dollar.
b. lower real interest rates and an appreciation of the dollar.
c. higher real interest rates and a depreciation of the dollar.
d. higher real interest rates and an appreciation of the dollar.
a
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When the Fed sells government securities
A) reserves decrease, leading to a decrease in the money supply by an amount more than the sale of the government securities. B) reserves increase, leading to a increase in the money supply by an amount more than the sale of the government securities. C) reserves increase, leading to a decrease in the money supply by an amount more than the sale of the government securities. D) reserves decrease, leading to a increase in the money supply by an amount more than the sale of the government securities.
The multiplier principle indicates that if business decision makers become more optimistic about the future and, as a result, increase their investment expenditures by $82 billion, real GDP
a. will increase by less than $82 billion if the economy was initially operating well below capacity. b. will increase by more than $82 billion if the economy was initially operating well below capacity. c. will increase by more than $82 billion if the economy was initially operating at full-employment capacity. d. will decline if the marginal propensity to consume is less than 1.