Using the equation of exchange and assuming fixed price controls and a constant velocity of money, a decrease in the discount rate could temporarily result in
A. Higher quantity of real output.
B. Higher velocity.
C. Higher price level.
D. Lower money supply.
Answer: A
Economics
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When an economy's production capacity is expanding:
A. nominal GDP, but not necessarily real GDP, is rising. B. net exports is always a positive amount. C. DI exceeds PI. D. gross domestic investment exceeds depreciation.
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If the MPC in an economy is 0.8, government could close a recessionary expenditure gap of $100 billion by cutting taxes by
A. $100 billion. B. $125 billion. C. $80 billion. D. $200 billion.
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