Suppose the equilibrium level of income exceeds the full employment level of income and there is high inflation. Hence, the government decides to implement a fiscal policy that will act to reduce national output and prices. This can be accomplished by:

a. decreasing government spending such that aggregate demand is reduced

b. raising taxes and government spending by the same amount such that aggregate supply is decreased and aggregate demand is increased

.c .increasing transfer payments such that aggregate expenditures decline.

d. lowering average tax rates such that aggregate supply is increased.e.increasing government spending such that aggregate expenditures are increased.

The interest rate that banks pay for borrowing overnight from other banks is called:

a.target rate

.b.prime lending rate

.c.federal funds rate

.d.bank rate.

e.real interest rate.

Suppose the reserve requirement is 10 percent and a person deposits $1,500 in a local bank. The local bank can now create a maximum of:

a.$1,500 in additional money, by lending $1,500.

b.$135 in additional money, by lending $135

.c.$150 in additional money, by lending $150.

d.$1,350 in additional money, by lending $1,350

.e.$15,000 in additional money, by lending $15,000.

Government spendingis financed by_____, _____, and _____.

a.taxes; public expenditures; private deductible expendituresb

b.public debt; welfare expenditures; social security expendituresc

c.public expenditures; business investment; change in government debtd

d. .taxes; government borrowing; issuing bondse.

e. taxes; changes in the reserves of the central bank; changes in net exports