Short answer questions on fiscal policy, monetary policy and money creation by banks.
Fiscal Policy
1. If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by:
2. An appropriate fiscal policy for severe demand-pull inflation is:
Use the following to answer questions 3:
3. Refer to the above diagram, in which Qf is the full-employment output. If aggregate demand curve AD1 describes the current situation, appropriate fiscal policy would be to:
How Banks and Thrifts Create Money
4. If the reserve ratio is 15 percent and commercial bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired checkable deposits, then the relevant monetary multiplier for the banking system will be:
Monetary Policy
5. Which of the following is correct? When the Federal Reserve buys government securities from the public also the money supply:
6. If the Federal Reserve authorities were attempting to reduce demand-pull inflation, the proper policies would be to:
7. If the economy were encountering a severe recession, proper monetary also fiscal policies would call for: