Question

If at some specific interest rate the quantity of money demanded is less than the quantity of money supplied, people will desire to buy interest-earning assets causing the interest rate to decrease.

Select one:

True

False

In recent years, the Fed has conducted policy by setting a target for the federal funds rate.

Select one:

True

False

A decrease in taxes is an expansionary fiscal policy designed to increase aggregate demand and reduce unemployment.

Select one:

True

False

If aggregate demand shifts to the left, then the economy will move down along the short-run aggregate supply curve to a lower price and output, but, in the long run the market will adjust to move the economy to more production and full employment as the short run aggregate supply curve also shifts to the left.

Select one:

True

False

Suppose the economy is in long-run equilibrium. The government decides to significantly increase spending on transportation infrastructure, which will lower shipping costs for many businesses. We might expect that in the short run, real GDP will increase and the price level will rise, but in the long run, there will be no effect on price.

Select one:

True

False

Answer 1

1.  True

A larger availability of capital helps to lower interest rates for the economy. A reduced supply of capital is increasing interest rates in the economy. To assess the interest rates, the prevalent amount of liquid money or supply coordinates with total demand for liquid money or demand to determine the interest rates.

2. True

Normally the Fed conducts monetary policy by setting a target for the rate of federal funds, the rate at which banks overnight borrow and lend reserves. It achieves its goal through open market operations, traditionally involving US financial transactions. Securities from the trusts.

3.  True

Expansionary fiscal policy tools include increasing government spending, decreasing taxes, or increasing government transfers. Doing any of these things will increase aggregate demand, leading to a higher output, higher employment, and a higher price level.

4. False

In long run demand curve is shift such a way so that full employement and more production is achieved in the economy. In the long run supply curve is perfectly inlastic.

5. False

In the long run equillibrium economy is at full employement level. now if tgovt. decide to increase its spending it will shift the AD curve rightward thus increasing the income in the short run but in long run economy will return back its natural rate of income with higher price.