A Decrease in Real GDP Would Affect the U

question 24

Multiple Choice

A decrease in real GDP would affect the U.S. economy by:

• A) cutting tax revenues and raising government expenditures.
• B) cutting government expenditures and raising tax revenues.
• C) raising both tax revenues and government expenditures.
• D) cutting both government expenditures and tax revenues.

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Definitions:

Required Reserve Ratio

The fraction of deposits that banks are required by law to keep on hand as reserves, either in their vaults or at a central bank.

Create Money

The process by which the money supply of a country is increased, typically by the central bank issuing currency or through the banking system's lending activities.

Real Estate

Pertains to land and any permanent structures or improvements attached to it, such as buildings, houses, and other property types.

Federal Funds Market

A market for overnight lending and borrowing of reserves among banks; the interbank market for reserves on account at the Fed.