A Simultaneous Reduction in Both Taxes and the Money Stock

question 39

Multiple Choice

A simultaneous reduction in both taxes and the money stock will always

• A)increase interest rates.
• B)lower income and raise the interest rate .
• C)lower income and raise the interest rate.
• D)increase income.
• E)raise income and raise the interest rate

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Definitions:

GDP

A synonym for Gross Domestic Product, it is the monetary measure of all final goods and services produced within a country's borders in a specific time period.

Money Supply

The complete accumulation of assets measured in money terms within an economy at any specified moment, including coins, cash, and the deposits across checking and savings accounts.

Interest Rate

The cost of borrowing money, expressed as a percentage of the total amount loaned, or the profit earned on savings and investments.

Money Market Equilibrium

The state where the supply of and the demand for money balances, resulting in economic stability at a given interest rate.