Which of the following does not describe a characteristic of short-term economic fluctuations?
A. Expansions and recessions are irregular in length and severity.
B. Durable-goods industries are less sensitive to short-term fluctuations than service and non-durable industries.
C. Expansions and recessions are felt throughout the economy.
D. The unemployment rate rises during recessions.
Answer: B
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The rate of interest banks charge other banks for overnight loans of reserves is the
A) prime rate. B) discount rate. C) federal funds rate. D) real rate.
To close a recessionary gap through fiscal policy, the government should
A) decrease government spending in order to increase aggregate supply. B) increase government spending in order to increase aggregate demand. C) reduce taxes in order to stimulate investment, and thus increase aggregate supply. D) increase government spending and taxes in order to both increase aggregate demand and aggregate supply.