In a simplified system, a bank receiving a new deposit can extend new loans equal to the amount by which its excess reserves increase

Refer to Table 27-1. Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2016 and in 2017 if Congress and the president do not use fiscal policy

If Congress and the president want to keep real GDP at its potential level in 2017, they should A) increase the level of interest rates. B) decrease the money supply. C) decrease government purchases. D) decrease income taxes.

The water-diamond paradox

A. occurs because goods essential to life such as water are cheap (and sometimes free). B. occurs because nonessential goods such as diamonds are rare and therefore very expensive. C. occurs because the price of a product is determined by its marginal utility, not its total utility. D. All of the choices are correct.