econ final exam
The group that sets the federal reserve system's policy on buying and selling government securities (bills, notes, and bonds) is the
Federal Open Market Committee (FOMC)
A Federal budget deficit exists when
Federal government spending exceeds tax revenues in a given year.
The Federal Reserve System consists of which of the following?
Board of Governors and the 12 Federal Reserve Banks
The M1 money supply is composed of
Checkable deposits and currency in circulation
Currency in circulation is part of
both M1 and M2.
The amount by which federal tax revenues exceed federal government expenditures during a particular year is the
budget surplus
What is the best example of public investment?
construction of highways
The Social Security program is designed to pay
current retirees, using funds from current contributions.
The crowding-out effect of expansionary fiscal policy suggests that
increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.
The reason for the Fed being set up as an independent agency of government is to
protect it from political pressure.
The goal of expansionary fiscal policy is to increase....
real GDP
The time that elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n)
recognition lag.
The financing of a government deficit increases rates and, as a result, reduces investment spending. This statement describes
the crowding-out effect
A $70 price tag on a sweater in a department store window is an example of money functioning as a
unit of account.
The federal reserve system is divided into...
12 districts
The public debt is the
Accumulation of all past deficits minus all past surpluses
A budget surplus means that
Government revenues are greater than expenditures in a given year
Michelle transfers $4,000 from her savings account to her checking account. What effect is this change likely to have on M1 and M2?
M1 increases and M2 stays the same
Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the
M1 money supply will decline and the M2 money supply will remain unchanged.
Which of the following best describes the idea of a political business cycle?
Politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections.
Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?
Reductions in federal tax rates on personal and corporate income.
Fiscal policy is enacted through changes in
Taxation and government spending
The functions of money are to serve as a
Unit of account, store of value, and medium of exchange
If you write a bank to purchase a used car, you are using money primarily as
a medium of exchange
Money functions as
a store of value, a unit of account, and a medium of exchange.
An appropriate fiscal policy for severe demand-pull inflation is
a tax rate increase.
The lag between the time that the need for fiscal action is recognized and the time action is actually taken is referred to as the
administration lag
The fiscal policy refers to the
deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level.
The paper money used in the United States is:
federal reserve banks
The value of money varies...
inversely with the price level
The value of money varies
inversely with the price level.
Contractionary fiscal policy is so named because it
is aimed at reducing aggregate demand and thus achieving price stability.
The amount of money reported as M2
is larger than the amount reported as M1.
Which of the following nations had the highest public sector debt as a percentage of GDP in 2015?
japan
a contractionary fiscal policy is shown as a
leftward shift in the economy's aggregate demand curve.
In the United States, the money supply (M1) includes
paper currency, and checkable deposits.
The political business cycle refers to the possibility that
politicians will manipulate the economy to enhance their chances of being reelected.
When there is inflation in the economy, it implies that the
price index is rising and the purchasing power of money is falling.
One timing problem in using fiscal policy to counter a recession is the "recognition lag" that occurs between the
start of the recession and the time is takes to recognize that the recession has started
If you place a part of your summer earnings in a savings account, you are using money primarily as a
store of value.
Stock market price quotations best exemplify money serving as a:
unit of account
One timing problem in using fiscal policy to counter a recession in the "operational lag" that occurs between the
time fiscal action is taken and the time that the action has its effect on the economy
Built-in stability means that
with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus, while a decline in income will result in a deficit or a lower budget surplus.