Starting from its potential output, an economy's government increases spending. in the long run, this economy will produce at: a. its potential output level, but at a lower aggregate price level. b. an output level that is greater than its potential output. c. an output level that is below its potential output. d. its potential output.

Explain whether each of the following events increases or decreases the money supply. a. the fed buys bonds in open-market operations. b. the fed reduces the reserve requirement. c. the fed increases the interest rate it pays on reserves. d. citibank repays a loan it had previously taken from the fed. e. after a rash of pickpocketing, people decide to hold less currency. f. fearful of bank runs, bankers decide to hold more excess reserves. g. the fomc increases its target for the federal funds rate.