22. Economic studies conducted in industrially advanced countries suggest there is: A.A positive relationship between the degree of independence of the central bank and the size of the average annual rate of inflation B.An inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inflation C.No relationship between the degree of independence of the central bank and the size of the average annual rate of inflation D.A positive relationship between the degree of independence of the central bank and the size of the central bank

23.A personal tax cut of $50 billion will affect GDP differently than an increase in government spending by $50 billion because: A.The increase in government spending is less expansionary than the decrease in taxes B.The increase in government spending ismore expansionary than the decrease in taxes C.Households may consume more than the additional income from the tax cut

D. None of the above

24.When the Federal government takes action to change taxes and spending to stimulate the economy such policy is: A.Passive B.Automatic C.Discretionary D.Nondiscretionary

25.Assume that the economy is in a recession and there is a budget deficit. A strict balanced-budget amendment that would require the Federal government to balance its budget during a recession will be: A.Expansionary and worsen the effects of the recession B.Contractionary and worsen the effects of the recession C.Contractionary and counter the effects of the recession D.Expansionary and counter the effects of the recession

26.An economist who favors a larger role for government in the economy would recommend: A.tax cuts during recession and reductions in government spending during inflation. B.tax increases during recession and tax cuts during inflation. C.tax cuts during recession and tax increases during inflation. D.increases in government spending during recession and tax increases during inflation.

27.The crowding-out effect suggests that: A.tax increases are paid primarily out of saving and therefore are not an effective fiscal device. B.government borrowing to finance the public debt increases the interest rate and reduces private investment. C.it is very difficult to have excessive aggregate spending in a capitalist economy. D.consumer and investment spending always vary inversely.

28.If the demand for money increases and the Fed wants interest rates to remain unchanged, which of the following would be appropriate policy? A.recall Federal Reserve Notes from circulation B.raise the legal reserve requirement C.buy bonds in the open market D.raise the discount rate

29.A Federal Reserve official notes: "A restrictive monetary policy can force a contraction of the money supply, but an expansionary monetary policy may not achieve an expansion of the economy." The official has described the problem of the: A.Inflexibility of monetary policy tools B.Change in taxes on monetary policy C.Cyclical asymmetry of monetary policy D.Political acceptability of monetary policy

30.In a full-employment economy an increase in M will cause inflation unless: A.V rises in proportion to the increase in M. B.the quantity of goods produced declines proportionately. C.tax reductions accompany the increase in the money supply. D.the velocity of money diminishes.

E. None of the above