Suppose policy makers pass a budget that reduces the budget deficit. A deficit reduction package such as this has a greater chance of increasing current output when
A) the policy is front-loaded.
B) financial markets believe that taxes will not increase in the future.
C) financial markets believe the Fed will lower interest rates in the future.
D) all of the above
E) none of the above
Question 2
Suppose bank A has assets of 100, liabilities of 60, and capital of 40. Its leverage ratio is
A) 1.5.
B) 2.5.
C) 0.6.
D) 0.4.
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Consider the production function ( ) 0.5 0.5 Y = AK L . Suppose both saving rate (s) and the ...