Author Question: In the long run, most economists agree that a permanent increase in government spending leads to ... (Read 166 times)

jrubin · **on:** Jun 29, 2018

In the long run, most economists agree that a permanent increase in government spending leads to

A) a decrease in private spending by less than the amount that government spending increased.
B) a decrease in private spending by the same amount that government spending increased.
C) no decrease in private spending.
D) a decrease in private spending by more than the amount that government spending increased.

Question 2

Refer to Table 15-1. The hypothetical information in the table shows what the values for real GDP and the price level will be in 2017 if the Fed does not use monetary policy.

Which of the following policies makes sense if the Fed wants to keep real GDP at its potential level in 2017?
A) The Fed should lower capital gains taxes.
B) The Fed should lower the target for the federal funds rate.
C) The Fed should pursue contractionary policy.
D) The trading desk should sell Treasury securities.