Question

5) The Great Recession beginning in 2007 was caused by a) The Federal Government reducing spending. b) The rapid increase and subsequent decline in housing prices. c) Foreign countries reducing their demand for American Goods. d) Baby Boomers retiring from the economy. 6) Suppose that the economy is experiencing a recessionary gap. If you believe in "small government", then the most appropriate policy would be to a) Raise income taxes. b) Lower income taxes. c) Raise government spending. d) Lower government spending. interest rate increases, there will be 7) The demand for loanable funds curve shows that as the _ the curve. A) nominal; a rightward shift in B) real; a rightward shift in C) nominal; movement down along D) real; movement up along. 8) As a result of the recession in 2008, the default risk increased. How did this change affect the loanable funds market? A) There was a movement up along the supply of loanable funds curve. B) There was a leftward shift in the supply of loanable funds curve. C) There was a movement down along the demand for loanable funds curve. D) There was a rightward shift in the supply of loanable funds curve. 9) "Counter-cyclical policy is about filling in holes and shaving off peaks, exactly what John Maynard Keynes prescribed for the economy." Congress and the president can smooth the business cycle by A) raising taxes in recessions and decreasing government spending in booms b) cutting taxes in recessions and increasing government spending in booms decreasing government spending in recessions and increasing it in booms D) increasing government spending in recessions and decreasing it in booms TO The American Recovery and Reinvestment Act of 2009 was an example of A) a single tiered fiscal policy approach using taxes. B) a single tiered fiscal policy approach using government spending. a two-tiered fiscal policy approach using government spending and taxes D) a two-tiered monetary policy approach using government spending and taxes.

Answer 1

5) The answer is B. We al know that the housing sector prices fell that caused the housing bubble to be created hence leading to the immediate cause of the 2007 crisis.

6) The answer will be C. We know that recession does occur when the purchasing power of the economy and the people is low. Hence government spending will increase the money supply.

7) The answer is A, as there is an increase in the nominal rates, in short run there is a rightward shift in the curve.

8) The answer is B. When there was crisis of 2008, there was no supply of any loans that people could get, this led to leftward shif of the curve.

9) The answer is D. Government spending in recession will help increase in purchasing power and when the boom is there which means enough money is already in circulation, one can decrease the money supply.

10) The answer to the question is B