Use the Following to Answer Questions

question 103

Multiple Choice

Use the following to answer questions :
Figure: Fiscal Policy with a Fixed Money Supply
-(Figure: Fiscal Policy with a Fixed Money Supply) Look at the figure Fiscal Policy with a Fixed Money Supply. Assume that this economy is at E₂. Now government deficit spending is decreased, but the Federal Reserve expands the money supply. According to this model:

• A)real GDP will decrease just as much as it would if the Federal Reserve had not expanded the money supply.
• B)real GDP will decrease, but not as much as it would if the Federal Reserve had failed to expand the money supply.
• C)real GDP will expand, but not as much as it would if the Federal Reserve had not expanded the money supply.
• D)interest rates will increase.

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Definitions:

Restrictive Indorsement

An endorsement on a negotiable instrument (like a check) that limits the way the instrument can be used or further negotiated.

Indorsement Purpose

The reason or intention behind endorsing a document, such as transferring rights or specifying conditions.

Discounts

Reductions in price given to customers, often used as a sales promotion technique.

Instrument

A written legal document that defines rights, duties, entitlements, or liabilities, such as a contract, will, promissory note, or share certificate.