Figure 32-3
-Figure 32-3 shows the impact of deficit spending and the corresponding economic expansion on the demand curve for money.If the Federal Reserve does not want interest rates to rise, it will
A) shift the money supply curve to the right by monetizing the deficit.
B) shift the money supply curve to the left by open-market sales of government securities.
C) maintain the current targets for both M1 and M2 money stocks.
D) engage in contractionary monetary policy, such as increases in the discount rate.
Correct Answer:
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Q158: Figure 32-2 Q159: "Budget deficits are inflationary." The truth of Q160: Figure 32-2 Q161: If the economy is near full employment Q162: If the government ran a major deficit, Q164: "Crowding-out" refers to the process by which Q165: The crowding-out effect is likely to be Q166: A budget deficit will be least inflationary Q167: The fallacy in the strict crowding-out argument Q168: Crowding out occurs when
A)high
A)increased taxes force higher
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