Fiscal policy includes adjustments in ________ so as to change ________.

Select one:

a.the cash rate; aggregate demand.

b.open market operations; long-run aggregate supply.

c.the cash rate; short-run aggregate supply.

d.tax rate; aggregate demand.

e.the quantity of money; short-run aggregate supply.

If a tax cut increases people's labour supply, then

Select one:

a.tax cuts decrease aggregate demand.

b.tax cuts cannot affect aggregate demand.

c.tax cuts increase potential output.

d.tax cuts help achieve price stability.

e.Both answers A and B are correct.

If the desired reserve ratio is 5 per cent and deposits is $575 billion, banks would hold

Select one:

a.$17.25 billion in excess reserves.

b.$1,725 billion in currency.

c.$28.75 billion in reserves

d.$557.75 billion in reserves.

e.$17.25 billion in reserves.

One feature of automatic fiscal policy is that it

Select one:

a.reduces the size of the government debt during times of recession.

b.requires no legislative action by government to be made effective.

c.is never implemented in developing economies.

d.automatically produces surpluses during recessions and deficits during inflation.

e.has no influence on unemployment.

In response to an inflationary gap, the Reserve Bank

Select one:

a.raises the cash rate by selling government securities.

b.lowers the cash rate by buying government securities.

c.requests assistance from Ministry of Finance.

d.raises the cash rate by buying government securities.

e.waits until the price level falls before acting