Suppose that the government spending multiplier is 2, and that the tax multiplier is -2.5. A reduction in government spending and taxes of $100 million will ____ Real GDP by ____.

With the single exception of changes in the capital gains tax rate, expansionary fiscal policy typically leads the real interest rate to ____, because it leads an existing government budget deficit to ____.

Expansionary fiscal policy that is implemented to prevent real GDP from falling below potential GDP will likely result in a ______ inflation rate and a _____ level of Real GDP.

Suppose that Jose withdraws $45 from his mom’s checking account at the Bank of Tampa. He keeps $15 in cash and deposits the rest in his own savings account at Bank of America. Which of the following has occurred?

Suppose that the Federal Reserve decides to conduct “extraordinary” open-market purchases. This leads the Federal Funds Rate to _____, and commercial banks should respond by ____ lending.

Suppose that Ford is an American company, and that Volkswagen is a German company. Which of the following would count in the American GNP, but not in the American GDP?

Reducing the Labor Income Tax leads to a(n) ____ in employment, and is considered ____ fiscal policy.

Which of the following functions do commercial banks NOT perform?

Real GDP Government Receipts Government Outlays $ 3 trillion $0.3 trillion $1.3 trillion $ 4 trillion $0.6 trillion $1.1 trillion $ 5 trillion $0.9 trillion $0.9 trillion $ 6 trillion $1.2 trillion $0.7 trillion $ 7 trillion $1.5 trillion $0.5 trillion The government experiences a “balanced budget” when Real GDP equals _____.

Which of the following is not one of the monetary policy tools of the Federal Reserve?