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AGEC 217 Exam 3 || A+ Verified Solutions.
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  • AGEC 217

Money can be interpreted as a kind of technology that increases the production of goods and services, because correct answers Money allows people to specialize in the production activities they do best. The consumption function is =A+b(Y-T+R), where A is autonomous consumption, b is the marginal...

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  • November 2, 2024
  • 3
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • money can be interpreted as a kind of technology

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  • AGEC 217
  • AGEC 217

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AGEC 217 Exam 3 || A+ Verified Solutions.
Money can be interpreted as a kind of technology that increases the production of goods and
services, because correct answers Money allows people to specialize in the production activities
they do best.

The consumption function is =A+b(Y-T+R), where A is autonomous consumption, b is the
marginal propensity to consume, Y is income, T is taxes and R is transfer payments. Suppose a
recession increases unemployment. The consumption function shows that correct answers the
resulting decrease in income could reduce consumption spending, which would decrease
aggregate demand and raise unemployment further.

The goal of the counter-cyclical monetary policy during a period of high and rising
unemployment is to correct answers decrease the real interest rate to increase aggregate demand.

If the inflation rate is falling below 2%, and the unemployment rate is rising above 5%, an
appropriate counter-cyclical monetary policy would be to correct answers buy Treasury bonds
from banks, to decrease the federal funds rate.

Which of the following is a counter-cyclical fiscal policy is a recession? correct answers An
increase in spending on highways and other infrastructure.

Using fiscal policy to offset recessions presents a number of problems to policymakers,
including correct answers the fact that households may save their tax cuts rather than spend
them,and added spending on infrastructure sometimes takes years to plan.

President Hoover's fiscal policy mistakes during the 1929-1933 period made the Great
Depression worse. Among these mistakes were correct answers raising taxes and cutting
spending to balance the Federal budget, which reduced consumer spending and aggregate
demand.

Among the causes of the "Roosevelt Recession" of 1937-38 were correct answers the Fed's
increased required reserve ratio, and increased taxes to fund Social Security.

During WWII the U.S. Treasury required the Federal Reserve to correct answers increase the
money supply to match rising money demand, in order to hold down Treasury borrowing costs.

There was a burst of inflation at the beginning of Korean War in 1950-51. This was caused by
correct answers an increase in panic buying by consumers, which increased the marginal
propensity to consume.

The baby boom is creating financial problems for the Social Security program because correct
answers benefits are financed primarily by current taxes, and there will be fewer working people
to support each retiree as the boomers retire.

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