The increased level of excess reserves that many banks held in 2008 made traditional monetary policy less effective.

Classical economists believe that in the short run

A) money neutrality exists and prices adjust rapidly. B) money neutrality does not exist and prices adjust rapidly. C) money neutrality exists and prices do not adjust rapidly. D) money neutrality does not exist and prices do not adjust rapidly.

According to the Mercantilists, governments should

A. not spend much on national defense. B. allow for free trade unencumbered by government regulations and restrictions. C. subsidize and encourage exports. D. subsidize and encourage imports.