Does the experience of World War II demonstrate that government budget deficits and surpluses can be used to stabilize aggregate demand?
A) No, because the deficits run during the 1930s did not end the recession.
B) No, because the fact that deficits or surpluses can alter aggregate demand does not prove they can stabilize it.
C) Yes, because nominal GDP increased by more than the amount of the deficit in each wartime year.
D) Yes, because World War II demonstrated the multiplier effect of deficits.
B
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Which of the following is true for a market that clears?
a. An excess supply of anything traded will lead to a fall in its price. b. An excess demand of anything traded will lead to a fall in its price. c. An excess supply of anything traded will lead to a rise in its price. d. An excess demand of anything traded will not lead to a price change. e. A high price will lead to a high demand.
You have a bond that pays $60 per year in coupon payments. Which of the following would result in a decrease in the price of your bond?
A) Coupon payments on newly-issued bonds fall to $40 per year. B) The likelihood that the firm issuing your bond will default on debt decreases. C) The price of a share of stock in the company rises. D) Coupon payments on newly-issued bonds rise to $75 per year.