Money is a convenience that makes the economic pie bigger

An economy that is producing a gross domestic product worth $100 million but is capable of producing an output worth $150 million at full-employment equilibrium would have a(n): a. recessionary gap of $50 million

b. expansionary gap of $100 million. c. recessionary gap of $150 million. d. expansionary gap of $250 million.

Suppose Trust Bank has $500 million in assets and $400 million in liabilities. The Fed purchases $45 million in bonds from the bank. Which of the following is a likely consequence of the Fed's action?

a. An increase in the bond holdings of Trust Bank by $45 million and a decrease in the bank's reserves by $45 million b. A decrease in both the bond holdings and reserves of Trust Bank by $45 million c. An increase in both the bond holdings and reserves of Trust Bank by $45 million d. A decrease in the bond holdings of Trust Bank by $45 million and an increase in the bank's reserves by $45 million