The most important function of the Fed is to
A. provide a system for collecting and clearing checks.
B. support the federal government's deficit spending by buying government securities.
C. regulate the money supply.
D. collect taxes.
Answer: C
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An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
In 1992, the base year, you were earning $500/week. Your wages rose to $900 in 2001, the current year, when the Consumer Price Index stood at 150. What statement can you make about what happened to your real wages over this period?
A. They rose. B. They fell. C. They remained the same. D. There is not enough information to determine whether they rose, fell, or remained the same.