Use the following diagram to answer the next question.
In the diagram, solid arrows reflect real flows and broken arrows are monetary flows. Flow (4) might represent
A. the purchase of stealth bombers.
B. personal income taxes.
C. investment spending by private corporations.
D. the services of NASA astrophysicists.
Answer: D
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Which of the following statements is correct?
a. It is monetary policy and not tax policy that influences interest rates. b. Tax reductions play little role in influencing output. c. Marginal tax rates today are lower than they have ever been in U.S. history. d. Budget deficits show little correlation with interest rates. e. None of the above.
A reason that the quantity theory of money has lost favor is that:
A. the federal funds market has been taken over by the Federal Reserve bank. B. the economy recently experienced an unexpected and deep recession. C. the quantity of money is better at predicting stock prices. D. money growth and inflation are no longer closely related.