Please check my answers; stuck on a few questions on my homework.
1. In the long run, an increase in the supply of bank loans is matched by a __________ in the price level and the quantity of real loans is __________.
A. rise; unchanged
B. rise; increased
C. fall; unchanged
D. fall; decrease
---my answer is "B"---
2. An increase in the supply of loanable funds is an increase in __________.
A. the inflation rate
B. the unemployment
C. federal funds rate
D. investments
---my answer "A"---
3. If real GDP is below potential GDP, the government might decrease its expenditure on goods and service, decrease transfer payments, raise taxes, or do some combination of all three. This is called a(n. __________.
A. automatic fiscal policy
B. discretionary fiscal policy
C. contractionary fiscal policy
D. fiscal stimulus
---my answer "A"---
4. Income taxes create a difference between the interest rate paid by companies and received by lenders. These taxes __________ saving, investment, and the growth rate of real GDP.
A. do not affect
B. lower
C. encourage, but may not change
D. increase
---my answer C---
5. What type of stabilizing fiscal policy is an increase in the health care budget for citizens without coverage?
A. automatic fiscal policy
B. discretionary fiscal policy
C. contractionary fiscal policy
D. long run fiscal policy
---my answer "A"---
#4 should be B; lower.
1. In order to determine the correct answer to this question, we need to understand the relationship between the supply of bank loans, the price level, and the quantity of real loans. In the long run, the price level is primarily determined by the overall supply of money in the economy. An increase in the supply of bank loans would result in an increase in the money supply, causing an increase in the price level. As a result, the correct answer is A. Rise in the price level and unchanged quantity of real loans.
2. To answer this question, we need to understand what loanable funds are and how an increase in their supply affects the economy. Loanable funds refer to the supply of money available for lending purposes. An increase in the supply of loanable funds means that there is more money available for borrowers to borrow. This increase in available funds for investment typically leads to an increase in investments. Therefore, the correct answer is D. Investments.
3. The question refers to a situation where the government takes action when real GDP is below potential GDP. In this case, the options provided suggest different fiscal policy actions that the government can take. Automatic fiscal policy refers to pre-determined actions that are automatically triggered when certain economic conditions are met. Discretionary fiscal policy requires intentional actions taken by the government to influence the economy. Contractionary fiscal policy refers to actions taken to reduce government spending or increase taxes in order to decrease aggregate demand. Fiscal stimulus refers to actions taken to increase government spending or decrease taxes in order to increase aggregate demand. Based on the options provided, the correct answer is B. Discretionary fiscal policy, as it involves intentional actions taken by the government.
4. To answer this question, we need to understand the impact of income taxes on saving, investment, and the growth rate of real GDP. Income taxes reduce the disposable income of individuals and companies, which can potentially impact their saving and investment decisions. Lower disposable income can lead to lower saving and investment levels, which in turn can affect the growth rate of real GDP. Based on this understanding, the correct answer is B. Lower, as income taxes have the potential to reduce saving, investment, and the growth rate of real GDP.
5. The question asks us to identify the type of stabilizing fiscal policy that involves an increase in the health care budget for citizens without coverage. Stabilizing fiscal policy refers to policies that aim to stabilize the economy by influencing aggregate demand. Since the increase in the health care budget for citizens without coverage is a deliberate action taken by the government to stimulate demand, it falls under discretionary fiscal policy. Therefore, the correct answer is B. Discretionary fiscal policy.