All of the following impact the effectiveness of Fed policy except
A. Global sources of money.
B. The willingness or reluctance of banks to lend funds.
C. The responsiveness of interest rates to changes in the money supply.
D. How well the Treasury follows the Fed's directions for releasing money.
Answer: D
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According to the interest-rate-based monetary policy transmission mechanism, a decrease in the money supply will
A) lead to an increase in investment spending and a decrease in real GDP which is greater than the increase in investment spending. B) lead to a decrease in investment spending and an increase in real GDP that is equal to the decrease in investment spending. C) lead to a decrease in investment spending and a decrease in real GDP which is greater than the decrease in investment spending. D) lead to an increase in investment spending and a decrease in real GDP that is equal to the increase in investment spending.
The individual supply curve of labor is backward bending because the substitution effect offsets the income effect at higher wage rates
a. True b. False