In the medium run, a tax increase that causes a reduction in the budget deficit will
A) affect only the price level.
B) not affect the price level but will alter the composition of output.
C) not affect the level of output, but will affect the composition of output.
D) affect both the level and composition of output.
C
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In the money market, in the short run in order to decrease the nominal interest rate, the Fed must
A) increase the discount rate. B) increase the quantity of money. C) decrease the quantity of money. D) decrease the demand for money. E) directly lower the interest rate and not change either the demand for money or the supply of money.
In the market for bananas, the price is $2.00 a bunch. An increase in the supply of bananas decreases the price of bananas and ________
A) the quantity supplied increases because the price falls B) increases the demand for bananas C) increases the quantity of bananas demanded D) creates a shortage of bananas