If the government wishes to encourage firms to internalize externalities, they should tax activities resulting in ________ externalities and subsidize activities resulting in ________ externalities.

Let M = money supply; P = price level; V = velocity; Y = real GDP. The equation of exchange is given by:

A) M x P=V x Y. B) M x V=P x Y. C) M x Y=P x V. D) M x V=(1/P) x Y.

Suppose the Fed sells $100 million of U.S. securities to the security dealers. If the reserve requirement is 20 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a:

a. $100 million decrease. b. $500 million increase. c. $500 million decrease. d. $100 million increase.