ANSWERS TO MATCHING I A. the most effective of these is sometimes said to be the graduated corporate income tax; they function to smooth out the vacillations of the business cycle. B. a line bowed out from a 45 line indicates the distribution of wealth in an economy. C. the nominal interest rate adjusted for the inflation rate. D. the difference between the value of goods and services imported and those exported. E. the impact of the Fed's statements regarding anticipated economic activity with the inference of what its policies in response to them are expected to be. F. the annual shortfall of revenue in relation to spending of the federal budget. G. an error of statistical validity based on projecting data of a sample to a larger universe. H. purports to demonstrate that the government's deficit would be balanced except for an unemployment rate above 5 % -- it is said to be $ 30 billion higher for each additional percent of unemployment. I. the Fed has a great influence on this; it is measured by a series of data, increasing in size but of decreasing liquidity, M1, M2, M3, and L. J. MV=PQ K. based on the assumption of a rational economic player, it suggests that people will act as if they anticipate inflation, for example, to be what they have been experiencing, and suggests that people will react to policies based on what they expect to occur because of them. L. the 'conflict' between the developed nations and the underdeveloped and developing countries as to which policies to pursue and as to who should set them, regarding their development, technology transfer, and their financing. M. largely under the control of the Federal Reserve, it deals with such things as money supply and interest rates. N. suggested by Milton Friedman and proposed by Nixon, about all that came from it was the Earned Income Credit. O. the rate of interest which the Fed charges member banks when they borrow money from it -- it also functions as an anchor for interest rates in general. P. purports to demonstrate the relationship between tax rates and government receipts from them, such that at high rates of taxation, the revenue the government collects will be in an inverse relation to the rate. Q. the idea that as government borrowing increases, credit available to the private sector will be limited, and interest rates will respond by rising. R. the accumulated indebtedness of of US federal budgets. S. include such measures as wage and price controls, but also changes in marginal tax rates such as those included in the graduated income tax. T. the actions of the Fed of selling securities to reduce the money supply, and buying them to enlarge it. U. the idea that some economies are better suited to certain economic activities than are others. V. set by the Fed, these are the requisite 'downpayment' to purchase securities. W. among its basic theories is the notion that economic activity will change in response to government policies impacting on the money supply, such that contractions follow reductions in the money supply. X. the portion of most deposits which banks must hold and not invest or loan; they are held for daily transactions, and are put 'on deposit' at the Fed branch the district of which the bank is located within; decreasing the ratio will increase the money supply, and vice versa. Y. its basic assumption is that there is an inverse relationship between economic growth rates and the unemployment rate, such that at full employment the rate of economic growth cannot be readily increased -- it overlooks the limitations of the unemployment rate
statistic and it also does not take into account the difference between economic growth and economic development, the latter of which may lead to higher rates of economic activity even where there is statistical full employment. Z. holds that an increase in the quantity of money will lead to an increase in price levels. AA. basic monetarist prescription that the money supply should increase at a constant rate, and that Fed or other policies which vacillate from that will produce inflation or economic stagnation. BB. the flow of US dollars and foreign currency in and out of the economy -- it includes financial fluxes above and beyond, but inclusive of, the trade balance. CC. medium of exchange, standard of value, store of value, standard of deferred payment. DD. the difference between purported potential and actual levels of output. Click Here