Ch.21,22,23 Review Micro Econ
during the 2007 -2009 recession, the money multiplier:
fell less than 1
institutions that serve as the bridge between savers and borrowers are known as:
financial intermediares
the idea tht banks hold only a portion of deposits and lend the rest of the rest out is called the:
frictional reserve banking system
The ____ lag is the time for policymakers to confirm the economy is trending in or out of a recession
receognition
Increased government ______ leads to a large increase in GDP when compared to the same reduction in ______
spending, taxes
the yield on a perpetuity bond has an interest of $60 and a price of $1,200 is:
$750
assume the reserve requirement is 20% and all banks are loaned up. if a new deposit of $10,000 is made into the 1st bank of roswell, with this deposit the bank can make new loans of:
$8,000
if a perpetuity has an interest payment of $80 and your required yield is 10%. The most you would be even considering
$800
most studies stimate the overall multiplier of the 2009 stimulus to be between
2.5 and 2
if a person borrows $3,000 at 8% interest and never makes any payments, how much will the loan balance be after 3 years?
3779.14
the yield on a perpetuity bond tht has an interest payment of $60 and a price of $1,200
5%
Suppose the government decided to lower tax rates by $100 billion. Given tht MPC is 0.8, what will be the effect on this policy change on GDP?
An increase of $400 billion in GDP
the gov budget constraint can be depicted as______, where G is government, T is tax revenue, M is for the money supply, B is bonds held by the public entities, and A is gov assists.
G-T= M+B+A
suppose MPC=0.75 and the government has just decided to increase government speding and net taxes both by $25 billion and the same time to maintain its budgetary balance. what will be the impact of this policy change on GDP?
GDP will increase by $25 billion
which of the following is the narrow money?
M1
which of the following is a teaser rate?
an interest rate on a car loan for a luxury automobile
'Which if the following would be the correct monetary policy intervention if the econ is in an inflatory gap?
an open market sale of gov bonds
the progressive income tax and transfer payments are the two main:
automatic stabilizers
MI includes:
cash, demand deposits, and other checkable deposits
what approach to federal finance would you agree with if you wanted the federal gov to restrict spending or raising taxes during booms and use surplus from the booms to offset deficits during recessions.
cyclically balanced budget
monetary policy lags
decision lag, implementation lag, information lag NOT speculation lag
changes in taxes first cause changes in _____, and thus the gov tax multiplier is ______ than the gov spending multiplier.
disposable income, smaller
Fiat money
doesn't necessarily hav any intrinsic value but has been declared by a gov to be money,
What type of gov spending would be the most effective in mitigating the crowding out effect?
education subsidies
liquidity
how quickly, easily, and reliably an asset can be converted into a medium of axchange
barter as a system tends to work only:
in primary econs w little product variety
as a result of the crowding-out effect, interest rates ______ and private sector borrowing______
increase, decrease
if the economy is producing at an output level below full employment, the government should _______ spending and ________ taxes
increase, decrease
elements of expansionary fiscal policy
increasing gov spending, cutting taxes, increasing transfer payments. NOT: expanding immigration
using deman-side fiscal policy to stimulate agregate demand when the economy is at full employment will primarily result in:
inflation
money:
is anything tht is accepted in exchange for other goods and services or for payment of death
the federal open market committee
is composed of the board of Governors and five other Reserve bank presidents
the ____ shows that when incentives to work and produce are hampered by a high federal marginal incom tax, reducing the marginal tax might actually increase the total.
laffer curve
When the economy is overheating and policymakers pursue contradictionary fiscal policy, they express willingness to trade off ______ output for a ______ price level.
lower, lower.
federal spending that is authorized by permanent laws and does not go through the annual appropriation process is called ______ spending
mandatory
which of the following assets is the least liquid?
money maker mutual funds
transfer payments are:
monies paid directly to inviduals by the government
traditional individual retirement account (IRAs) as taxed
only when you make withdrawals
_____ Government spending, _____transfer payments, and _____ taxes are all examples of contractionary fiscal policy.
reducing, reducing, raising
money leakers tend to _________ during recessions, causing the actual money multiplier to:
rice, fall
if the Fed wants to raise the federal funds rate, it will______ bonds, which __________ bond prices
sell, lowers
the solution o simultaneous presence of inflation and underemployment is to implement policies tat shift the:
short run aggregate supply curve to the right
M2 is ________ in dollar value than M1, is also contains ____ assets
smaller, liquid
automatic stabilizers are designed so that as income falls,
spending does not fall as much as income
the discount rate is the interest rate that:
the fed charges commercial banks for short termloans
if the federal reserve decides to increase the money supply:
the federal funds rate will rise
the notion of fictional finance says that:
the government should not focus on any deficits or surplus caused by the budget and focus on maintaining the economy at full employment
for the federal reserve, the most important and widely used monetary policy tool is:
the open market operations
_____ was the total accumulation of past budget deficits less surpluses
the public debt
on a commercial bank's balance sheet:
total reserves are assets but deposits are liabilities
primary functions of money
unit of account, medium of exchange, store of value
