ECO 561 Course Great Wisdom / tutorialrank.com ECO 561 Course Great Wisdom / tutorialrank.com | Page 18

expands the size of government. D. is aimed at achieving greater price
stability.
33) Suppose the price level is fixed, the MPC is .5, and the GDP gap
is a negative
$100 billion. To achieve
government should: A.

full-employment

output

(exactly),

increase government expenditures by $100 billion. B. reduce taxes by
$200 billion.
C. increase government expenditures by $50 billion. D. reduce taxes
by $50
billion.
34) Assume the Standard Internet Company negotiates a loan for
$5,000 from the
Metro National Bank and receives a checkable deposit for that
amount in exchange
for its promissory note (IOU). As a result of this transaction: A. the
supply of
money is increased by $5,000. B. the Metro Bank acquires reserves
from other
banks. C. the supply of money declines by the amount of the loan. D.
a claim has been
"demonetized."
35) If the Fed were to purchase government securities in the open
market, we