Indicate whether each of the following statements is true or false, and explain each of your answers with words, numbers, and/or diagrams, as relevant. 

a). The permanent income model would predict a one-time tax rebate won't have a large effect on stimulating the economy 

b). Government will automatically collect more tax revenue and spend more on transfer programs when the economy is doing well, thus causing real GDP to increase further. 

c). A Central Bank such as the Fed will always lower interest rates if it increases the money supply. [Include a diagram on money supply and demand] 

d). For countries in a fixed exchange rate system, an increase in interest rate in one country will lead to lower interest rates in other countries. 

Answer rating: 100% (QA)

aTrue because under permanent income model transitory income doesnt affect the consumption pat... View the full answer