Question

In: Economics

39. Supply-side fiscal policy includes increases in government employees’ pay and individual tax breaks. has been...

39.

Supply-side fiscal policy

includes increases in government employees’ pay and individual tax breaks.

has been proven not to work.

has immediate effects on aggregate supply.

takes time to affect aggregate supply.

is emphasized as a short-run solution to growth problems.

41.

How is it that the banking system is able to lend by a multiple of its excess reserves?

Banks are required to hold only enough cash to meet the withdrawal needs of depositors.

Loans can be made to borrowers.

Required reserves have to be vault cash.

Banks only have to hold a fraction of their deposits as reserves and can lend the rest to borrowers.

Banks must hold their required reserves at the Federal Reserve.

Expert Solution

39.Supply side fiscal policy

takes time to affect aggregate supply

(Supply side fiscal policy aims at creating better environment for the business houses to run,and so supply side policies take a long time to bring desired effects.They include deregulation,income tax cuts,reduction of welfare benefits,as they have long term benefits they take longer time to get results and thus takes time to affect the aggregate supply)

40.How is it that the banking system is able to lend money by a multiple of its excess reserves?

Banks only have to hold a fraction of their deposits as reserves and can lend the rest to borrowers.

(Banks are able to lend money by a multiple of its excess reserves,as according to the rate set by the Federal Reserve banks have to only keep aside a limited amount of the deposits held by them as reserves,the balance of these deposits are used by the banks to lend money to the borrowers and thus the rotation of money takes place.)

Rahul Sunny answered 1 year ago

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