Answer the following questions true (T) or false (F)
1. A surplus is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.
2. A surplus occurs when the market price is lower than the equilibrium price.
3. It is possible for a market for a good to experience a surplus and a shortage at the same time.
1. TRUE
2. FALSE
3. FALSE
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The currency drain reduces the amount of
A) reserves available to banks to make loans. B) currency the Fed has outstanding in the economy. C) currency available for banks to borrow from the Fed. D) the monetary base. E) open market operations the Fed can make.
Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced. What will happen to real equilibrium GDP?
A) There will be no change in real equilibrium GDP. B) Real equilibrium GDP will fall. C) Real equilibrium GDP will rise. D) Real equilibrium GDP will initially rise, but then fall below its previous equilibrium value.