What would be a way for the Federal Reserve to slow down the economy when it is growing too quickly or is inflationary?
A) print more money
B) encourage the stock market
C) sell more government bonds
D) buy back government bonds on the open market
C
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The economy was in long-run equilibrium when aggregate demand increased. At this point in time, the expected inflation has started to adjust to the new higher actual inflation rate. According to the (Friedman) natural rate theory, this means the unemployment rate in the economy must currently be
A) decreasing. B) increasing. C) higher than it was in long-run equilibrium. D) equal to what it was in long-run equilibrium. E) There is not enough information to answer the question.
When the required reserve ratio is decreased, the excess reserves of member banks are:
A. reduced, but the multiple by which the commercial banking system can lend is unaffected. B. reduced and the multiple by which the commercial banking system can lend is increased. C. increased and the multiple by which the commercial banking system can lend is increased. D. increased and the multiple by which the commercial banking system can lend is reduced.