Suppose Policy Makers Pass a Budget That Reduces the Budget

question 1

Multiple Choice

Suppose policy makers pass a budget that reduces the budget deficit.A deficit reduction package such as this has a greater chance of increasing current output when

• A)the policy is front-loaded.
• B)financial markets believe that taxes will not increase in the future.
• C)financial markets believe the Fed will lower interest rates in the future.
• D)all of the above
• E) none of the above

Understand the mechanics behind the creation and destruction of money through banking transactions.

Identify the significance of key acts like the Glass-Steagall Act and the Depository Institutions Deregulation and Monetary Control Act of 1980.

Grasp the implications of reserve requirements on banks' lending capabilities.

Recognize the effects of international financial actions on U.S. monetary policy and interest rates.

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Definitions:

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