9 When there is a positive output gap, compared to when monetary policy is used, using fiscal policy to restore efficiency results in

A.

greater output and greater consumption.

B.

less output and less consumption.

C.

less output and an ambiguous change in the proportion of output devoted to consumption.

D.

less output and greater consumption.

E.

greater output and less consumption.

2.The current account surplus is NOT

A.

the excess of national savings over investment.

B.

private saving less government deficit.

C.

the trade balance.

D.

the negative of the current account deficit.

E.

output less taxes and trade deficit.

3

In the Keynesian transmission mechanism for monetary policy, an increase in the money supply has its first effects

A.

in financial markets; the real interest rate falls to equate money demand with money supply, and this acts to increase the demand for goods.

B.

in goods markets; the demand for goods rises, and this acts to decrease the real interest rate.

C.

in labour markets; the real wage falls, and this acts to increase the demand for goods.

D.

in goods markets; the demand for goods falls, and this acts to increase the real interest rate.

E.

in financial markets; the real interest rate falls to equate money demand with money supply, and this acts to decrease the demand for goods.

4

One major potential problem with using negative nominal interest rates in liquidity traps is that this policy could ?

A.

produce inefficiencies in the banking system, because banks cannot lower the interest rates on their deposit accounts enough to compete with currency.

B.

eliminate any output gap.

C.

produce inefficiencies in the banking system, because banks cannot raise the interest rates on their deposit accounts enough to compete with currency.

D.

encourage consumers and firms to hold less currency than is socially efficient.

E.

increase the size of the output gap.