chp 13 &14 set
Fiscal policy attempts to achieve all of the following objectives except _
a stable money supply
The main events that can put a bank under stress include all of the following
-wides spread fall in asset prices -significant currency drain -run on the bank
A fall in real GDP that results in a decrease in personal income tax receipts is an example of
automatic fiscal policy
In the market for bank reserves, if the federal funds rate target is higher than the federal funds rate, the Fed will take action to ________ reserves
decrease of the supply
When an economy is below full employment and the government has a budget deficit, that deficit
exceed structural deficit
An economy is experiencing a recessionary gap. The government can
increase expenditure or cut taxes to increase aggregate demand
Taxes and needs-tested spending work as automatic fiscal policy to dampen the business cycle because taxes ______ during an expansion, and needs-tested spending ______ during a recession
increase; increase
The Federal Reserve monetary policy goals of maximum employment mean
keeping the unemployment rate close to the natural unemployment rate.
If the demand for reserves is unchanged, an increase in the quantity of reserves will
lower the federal funds rate.
The objectives of monetary policy are
maximum employment, stable prices, and moderate long-term interest rates
Who is responsible for U.S. monetary policy? The ______ appoints the members and the Chairman of the Board of Governors of the Fed. The ______ is responsible for the conduct of monetary policy.
president/ fed
Federal Reserve monetary policy goals include
price level stability
An open market sale of government securities by the Federal Reserve shifts the ________ reserves curve _______
supply of; leftward
How do the Fed's monetary policy actions influence the exchange rate
the FED influences the change rate by changing the US interest rate differential
A country has been in existence for only two years. In the first year, receipts were $1.0 million and outlays were $1.5 million. In the second year, receipts were $1.5 million and outlays were $2.0 million. At the end of the second year, the government had issued debt worth __
$1 million
A decrease in the tax on capital income ______ the real interest rate and ______ investment and economic growth.
decreases; increases
Interest rates ______ in response to the Fed's actions. The short-term interest rateslong dash—the federal funds rate and the short-term bill ratelong dash—move
fluctuate; closely together
From 2009 through 2012, the long-term real interest rate paid by the safest U.S. corporations fell from 4 percent to 2 percent. During that same period, the federal funds rate was roughly constant at 0.25 percent a year. A fall in the federal funds rate ______ the supply of bank loans and the supply of loanable funds, and ______ the equilibrium real interest rate.
increases; lowers
Expansionary fiscal policy when the economy is below full employment ______ aggregate demand and real GDP, and the price level ___
increases; rises
A budget deficit that needs government action to remove it is a ______ deficit. A ______ deficit will disappear when the economy moves back to full employment
structural; cyclical