The non-bank public chooses among various financial assets in deciding in what form it wants to hold liquidity. It thereby increases or decreases
I. the M1 measure of money supply.
II. the reserves of commercial banks.
III. the reserves that commercial banks are required to hold.
A) none of the above since only the Fed can alter the money supply
B) I, II, and III
C) I and II only
D) I only
Ans: C) I and II only
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When a unit tax is placed on a supplier they are generally able to shift a portion of the burden to demanders by raising the prices paid by demanders
a. True b. False
As a result of the existence of automatic stabilizers
A. the government budget deficit will always increase during a period of economic recession. B. the economy will always tend to move toward a full-employment equilibrium. C. the government budget deficit will always increase during a period of economic expansion. D. the business cycle will no longer exist. E. None of the choices are correct.