According to the traditional Keynesian school of thought, expansionary fiscal and monetary policy will:
a. increase interest rates, thereby shifting the investment function to the right.
b. reduce both consumption and investment spending, thereby eliminating all inflationarypressur es.
c. reduce investment spending, thereby stabilizing the aggregate supply shocks.
d. stimulate both consumption and investment spending, thereby increasingaggregate demand.
e. shift the aggregate demand curve to the left, thereby reducing the unemployment rate.
Question 2
If banks faced a 100 percent reserve requirement, a decrease in banking reserves of 4 million would:
a. increase the money supply by 4 million.
b. increase the money supply by 400 million.
c. decrease the money supply by 4 million.
d. decrease the money supply by 400 million.
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