According to monetarists, an expansionary fiscal policy is a weak stabilization tool because:
A. the asset demand for money varies inversely with the rate of interest.
B. government borrowing to finance a deficit will raise the interest rate and reduce private
investment.
C. government borrowing will reduce the supply of money in circulation and depress the GDP.
D. government borrowing to finance a deficit will lower interest rates, increase money
balances, and lower velocity.
B. government borrowing to finance a deficit will raise the interest rate and reduce private
investment.
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Given an upward-sloping aggregate supply curve, which of the following is most likely to occur if the Fed pursues restrictive monetary policy, ceteris paribus?
A. The equilibrium price level and output will both decrease. B. The equilibrium price level and output will both increase. C. The equilibrium price level will decrease but output will stay the same. D. The equilibrium output will decrease but the price level will stay the same.
"To count as required reserves, the reserves must be on deposit at the bank's district Federal Reserve Bank." Is the previous statement correct or incorrect?
What will be an ideal response?