c. Government purchase d. Net export Table 22-1 Growth Rate Years to double Nati
ID: 1128167 • Letter: C
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c. Government purchase d. Net export Table 22-1 Growth Rate Years to double Nation C 35 22. Refer to Table 22-1. Which nation has the lowest growth rate? a. Nation C b. Nation B c. Nation A d. Nation ID 23. If the GDP is $600 billion and the money supply is $200 billion, the velocity of money is a. $30 b. 1.2 c. 3 d. 12 24. To close a recessionary gap, the fed can use a. Contractionary monetary policy b. Expansionary fiscal policy c. Expansionary monetary policy d. Contractionary fiscal policy 25. To close an inflationary gap, the government can use a. Contractionary fiscal policy b. expansionary monetary policy c. Expansionary fiscal policy d. None of the above 26. Due to the money multiplier effect, the potential money creation by banks is equal to Initial deposit times the money multiplier Initial deposit times the MPC a. b. c. Initial deposits plus MPS d. None of the above.Explanation / Answer
36. B
M x V= P x T
M= Money supply
V= Velocity of money
P= Price level
Q= Total number of economic transactions.
37 A. In recession the Fed would buy bonds to increase AD. Buying bonds will increase money supply in the economy.
38. D.Required reserves are a percentage of deposits. It is the reserves the commercial banks must hold with the central bank.
39. B. Crowding out. Higher budget deficits leads to higher government borrowings, raising the interest rates. This higher interest rates will make it more difficult for private business to borrow and the businesses are “crowded out
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