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3 pts RPNOW Question 17 onor Code If the government lowers taxes to stimulate the economy but then raises taxes in the future, according to the neoclassical consumption model, because of urces transitory income rises; falling discount factors the present value of wealth remains unchanged, and consumption today does not change; Ricardian equivalence consumption will rise today, but fall in the future; the lack of consumption smoothing tax revenues will rise; the Laffer curve savings in each period rises; precautionary savingfor Students Now D Question 20 Code If current output is , = $12 billion and potential output Y, = $11.25 billion, then the economy is in a and ", is about percent. ces boom; 6.7 boom; -6.7 recession; -6.2 None of these answers is correct. recession; -6.7for Students 3 pts Vow D Question 16 Code Over the past few years, the Chinese have bought billions of dollars of U.S. bonds, pushing down U.S. interest rates. From this, you conclude that: there will be no change in short-run output. short-run output will fall along the IS curve, possibly pushing the economy toward recession. short-run output will rise along the IS curve, possibly pushing the economy toward expansion. short-run output will fall as the IS curve shifts left, possibly pushing the economy toward recession. the federal government will lower taxes. Previous JimStudents D/ Question 18 de The Phillips curve in the text shows the relationship between and positive; inflation; unemployment negative; inflation; unemployment negative; the change in inflation; unemployment positive; the change in inflation; short-term economic fluctuations negative; the change in inflation; short-term economic fluctuations Previousdents D Question 19 As lender in the last resort, the Fed loans money to banks at: the three-month T-bill interest rate. the discount rate. the prime interest rate. the federal funds rate. O LIBOR

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