Economists agree that the multiplier effect on real output is ...

[ishan]

Economists agree that the multiplier effect on real output is close to zero when:
 a. inflation is very low.
 b. the economy is at or near full employment.
  c. the national debt is relatively small.
 d. shovel-ready projects exist.

Question 2

Suppose that the Fed decides to decrease the money supply by 0.87 percent. If the velocity of money is constant, then the quantity theory of money predicts that:
 a. nominal GDP will remain unchanged.
  b. the quantity of output will rise by 0.87 percent.
  c. nominal GDP will fall by 0.87 percent.
  d. the price level will fall by 0.87 percent.
  e. real GDP will fall by 0.87 percent.

[SVictor]

Answer to Question 1

b

Answer to Question 2

c