Refer to Figure 15-15. In the figure above, suppose the economy ...

[theo]

Refer to Figure 15-15. In the figure above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could the Federal Reserve use to move the economy to point C?
 
  A) decrease income taxes B) sell Treasury bills
  C) decrease the required-reserve ratio D) buy Treasury bills

Question 2

What is the difference between a command economy and a laissez-faire economy?
 
  What will be an ideal response?

[jointhecircus]

Answer to Question 1

B

Answer to Question 2

The major difference lies in how the two types of economies answer the three basic questions. In a command economy, a central government either directly or indirectly sets output targets, incomes, and prices. In a laissez-faire economy, individual people and firms pursue their own self-interests without any central direction or regulation.