Answer the following statements true (T) or false (F)
1) If government decreases its purchases by $20 billion and the MPC is .8, equilibrium GDP will
decrease by $100 billion.
2) If the MPC is .9, a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.
3) A recessionary expenditure gap in a mixed open economy can be measured as the extent to
which aggregate expenditures (C a + I g + X n + G) fall short of real GDP at the full-employment
level of real GDP.
4) The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-
employment GDP differ.
1) T
2) F
3) T
4) F
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Which of the followings is a duty of the Board of Governors of the Federal Reserve System?
A) setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash B) setting the maximum interest rates payable on certain types of time deposits under Regulation Q C) regulating credit with the approval of the president under the Credit Control Act of 1969 D) All governors advise the president of the United States on economic policy.
The two types of financial systems tend to treat
A) small firms alike. B) large firms alike. C) both small and large firms alike. D) neither small nor large firms alike.