The precautionary demand for money is
An idle balance
An active balance
Directly related to interest rates
Inversely related to income
A fall in interest rates is likely to
Increase aggregate demand
Increase savings
Decrease consumption
Decrease exports
To reduce the supply of money the government could
Reduce interest rates
Buy back government bonds
Sell government bonds
Encourage banks to lend
The liquidity trap occurs when the demand for money
Is perfectly interest elastic
Is perfectly interest inelastic
Means that an increase in money supply leads to a fall in the interest rate
Means that an increase in the money supply leads to an increase in the interest rate
In a regressive tax system
The amount of tax paid increases with income
The average rate of tax decreases with more income
The average rate of tax falls as income increases
The average rate of tax is constant as income increases
If the economy grows the governments budget position should automatically
Worsen
Improve
Stay the same
Decrease with inflation
A government might use tax to
Discourage consumption of goods with positive externalities
Discourage consumption of merit goods
Discourage consumption of public goods
Discourage consumption of goods with negative externalities
