The immediate effect of a purchase of a government bond on the gross domestic product (GDP) is_____
a. a decrease in consumption
b. an increase in government spending
c. an increase in investment
d. a decrease in investment
e. nonexistent, since no real goods and services have been produced
e
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If people decide to hold some of their cash and not deposit it, then the:
A. money multiplier overestimates how much money will be created in the economy. B. reserve ratio is not fully functioning, and should be raised. C. reserve ratio is not fully functioning, and should be lowered. D. money multiplier underestimates how much money will be created in the economy.
The budget line will shift parallel to the left if:
A. income increases. B. income decreases. C. the price of the good on the vertical axis increases. D. the price of the good on the vertical axis decreases.