If the government increases its spending by 410 billion and private investment s
ID: 1211886 • Letter: I
Question
If the government increases its spending by 410 billion and private investment spending falls by $9 million, the multiplier will be 10. The tax multiplier is smaller than the government investment multiplier. M^1 includes currency, demand and time deposits. Excess reserves are the amount by which actual reserves exceeds required reserves. The level of employment, output, prices, actually achieved by the economy depend upon the level of total spending in the economy. All the commercial banks in the US are members of the Federal Reserve System. The supply of money increases when the public purchases government bonds from commercial banks. Business cycles affect almost the entire economy, but it does not affect all pats in the same way and to the same degree. When the country is experiencing inflationary pressures due to excessive aggregate demand, an appropriate fiscal policy would be to increase taxes. Open market purchases by the Federal Reserve banks tend to raise interest rates. If the marginal prosperity to consume out of disposable personal income is .8, the multiplier in the real world will be somewhat larger than .5. The Federal Reserve Banks are owned by the general public.Explanation / Answer
13- False
14- False
15- True
16- True
17- False
18-True
19-False
20-True
21- False
22- True
23- False
24-False