The banking system currently has $50 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time sells $10 billion worth of bonds, then by how much does the money supply change?
a. It falls by $20 billion.
b. It falls by $110 billion.
c. It falls by $180 billion.
d. None of the above is correct.
c
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Which of the following is an explanation as to why fluctuations in real GDP have become less volatile in the United States since 1950?
A) The government has become less inclined to intervene to stabilize the economy. B) Unemployment insurance and other government transfer programs have become more prevalent. C) The government and the Federal Reserve have decreased regulation and scrutiny of the financial system. D) Goods manufacturing has become a larger fraction of GDP.
A government spending and taxation policy to achieve macroeconomic goals is known as:
a. countercyclical policy. b. fiscal policy. c. monetary policy. d. a balanced budget. e. presidential discretion.