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40. In an effort to address the troubled economy, ..."For the ninth time in just over a year, the Federal Reserve is expected to cut interest rates, quite possibly its last reduction in this downturn." Rates have not been this low "... since 2003, when the economy was growing at a snail's pace. " www.csmonitor.com, 10/28/2008 The Fed's rate cuts will ________ bank reserves and ________. (A) increase; increase the money supply and real GDP (B) decrease; decrease the money supply and real GDP (C)increase; increase the exchange rate and real GDP (D) decrease bank reserves; decrease the exchange rate and real GDP

39. "European Economic Recovery Plan" "The European Commission urged EU governments to jointly combat the economic slowdown with 200 billion euros ($256 billion) in spending and tax cuts to boost growth and consumer and business confidence. " The plan "...would see the 27 EU governments spend 1.5 percent of the bloc's gross domestic product to halt the slowdown that has already pushed some European nations into recession." www.iht.com, 11/26/2008 The plan is expected to (A) shift the AD curve rightward and increase real GDP. (B) shift the AD curve leftward and decrease the recessionary gap. (C)decrease the recessionary gap and decrease the price level. (D) use the autonomous tax multiplier to eliminate the inflationary gap.

38. Which of the following is considered a purpose of the federal budget? I. To help the economy achieve full employment. II. To finance the activities of the federal government. III. To promote sustained economic growth. (A) I and II (B) I and III (C)II and III (D) I, II and III

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