Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?
What will be an ideal response?
No, expansionary fiscal policy does not directly increase the money supply. The president and the Congress fight recessions by increasing spending, not the money supply, by either increasing government spending or cutting taxes to increase household disposable income and, therefore, consumption spending.
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High prices do not occur in laissez-faire markets
a. True b. False Indicate whether the statement is true or false
A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because
a. producers are likely to change the number of goods they sell from year to year. b. producers will generally reduce the quality of goods as prices increase over time. c. consumers will tend to substitute away from goods that become more expensive. d. consumers will usually reduce their consumption of goods when they become relatively cheaper.