ECON FINAL

ItemBillions of DollarsCheckable Deposits$2,000Small TIme Deposits350Currency Held By The Public80Savings Deposits, Including Money-Market Deposit Accounts1,300Money-Market Mutual Funds Held By Individuals600Money-Market Mutual Funds Held By Businesses700 The accompanying table contains hypothetical data for an economy. The size of the M2 money supply is

$4,330

Suppose the world price of widgets is $5 each. If a widget-importing country imposed a $2 per widget tariff, what price would that country's consumers pay for widgets?

$7

Refer to the diagram for a specific economy. The curve on this graph is known as a

Phillips Curve

Which of the following will happen when the Federal Reserve buys bonds from the public in the open market and the amount of cash held by the public does not change?

The required reserve ratio will increase

An appropriate fiscal policy for a severe recession is

a decrease in tax rates

Which of the following allegedly contributed to the stagflation in the mid-1970s

a dramatic increase in oil prices

If you are estimating your total expenses for school next semester, you are using money primarily as

a unit of account

Refer to the diagram of the market for money. The downward slope of the money demand curve Dm is best explained in terms of the

asset demand for money

The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is the domestic demand curve. The world price of a T-shirt is $5. The U.S. government imposes a $2 per unit tariff on imported T-shirts.The figure above shows that the government revenue from the tariff is

$20 million per year

If nominal GDP is $600 billion and, on the average, each dollar is spent three times per year, then the amount of money demanded for transactions purposes will be

$200 billion

ItemBillions of DollarsCheckable Deposits$2,000Small TIme Deposits350Currency Held By The Public80Savings Deposits, Including Money-Market Deposit Accounts1,300Money-Market Mutual Funds Held By Individuals600Money-Market Mutual Funds Held By Businesses700 The accompanying table contains hypothetical data for an economy. The size of the M1 money supply is

$2080

When the Fed acts as a "lender of last resort," as it did in the financial crisis of 2007-2008, it is performing its role o

being the bankers' bank

Refer to the graphs. Growth of production capacity is shown by

both the shift from AB to CD and the shift from X to Y

The amount by which government expenditures exceed revenues during a particular year is the

budget deficit

In the United States, the money supply (M1) includes

coins, paper currency, checkable deposits, and credit balances with brokers.

Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. If aggregate demand is AD3 and the monetary authorities desire to reduce it to AD2, they should

decrease the money supply from $120 to $100.

The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of a T-shirt is $5. Based on the figure above, as a result of international trade, U.S. domestic production ________ million T-shirts per yea

decreases by 20

If the MPC in an economy is 0.8, government could shift the aggregate demand curve rightward by $100 billion by

decreasing taxes by $25 billion

In terms of aggregate supply, a period in which nominal wages and other resource prices are unresponsive to price-level changes is called the

short run

Refer to the diagram relating to short-run and long-run aggregate supply. The

short-run aggregate supply curve is B.

Inflation accompanied by falling real output and employment is known as

stagflation

If you place a part of your summer earnings in a savings account, you are using money primarily as a

store of value

The asset demand for money is most closely related to money functioning as a

store of value

Money functions as

store of value, unit of account, medium of exchange

An economist who favors smaller government would recommend

tax cuts during recession and reductions in government spending during inflation

Refer to the diagram, in which T is tax revenues and G is government expenditures. All figures are in billions. In this economy,

tax revenues vary directly with GDP, but government spending is independent of GDP.

A tariff is

A tax on imported goods

Refer to the given balance sheets. If the reserve ratio is 25 percent, commercial banks have excess reserves of Reserves$72 Checkable Deposits$240 Securities110 Loans From Federal Reserve Banks 2 Loans60 Securities$240 Reserves of Commercial Banks$72 Loans to Commercial Banks2 Treasury Deposits30 Federal Reserve Notes140 A. $24. B. $22. C. $12. D. $16.

C. $12

The M1 money supply is composed of

Checkable deposits and currency in circulation

Refer to the given market-for-money diagrams. The total demand for money is shown by

D3

________ occurs when a foreign firm sells its exports at a lower price than its cost of production.

Dumping

Which group is responsible for the policy decision of changing the money supply?

Federal Open Market Committee

The discount rate is the rate of interest at which

Federal Reserve Banks lend to commercial banks.

A $20 bill is a

Federal Reserve Note

The paper money used in the United States is:

Federal Reserve Notes

aper money (currency) in the United States is issued by the

Federal Reserve banks

Refer to the diagram of the market for money. The equilibrium interest rate is

I2

The given curve is known as the

Laffer Curve

Refer to the graph. Assume that the economy is in a recession with a price level of P1 and output level Q1. The government then adopts an appropriate discretionary fiscal policy. What will be the most likely new equilibrium price level and output?

P2 and Q2

The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is the domestic demand curve. The world price of a T-shirt is $5. The U.S. government imposes a $2 per unit tariff on imported T-shirts.The figure above shows that as a result of the tariff, the quantity of T-shirts produced in the United States ________, and the quantity of T-shirts imported ________.

increases by $15 million per year; decreases by 30 million per year

The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of an airplane is $150 million. Based on the figure above, as a result of international trade, U.S. domestic production ________ airplanes per yea

increases by 300

The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of an airplane is $150 million. In the figure above, the United States ________ airplanes per year.

increases by 300

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

If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by

increasing government spending by $4 billion

When protection is encouraged to protect a growing domestic industry; which of the following is being used?

infant-industry argument

Discretionary fiscal policy refers to

intentional changes in taxes and government expenditures made by Congress to stabilize the economy.

The purchasing power of money and the price level vary

inversely

Answer the question on the basis of the table, in which columns (1) and (2) indicate the transactions demand (Dt) for money and columns (1) and (3) show the asset demand (Da) for money. (1) Interest Rate (2) Dt (3) Da12% $100 $010 100 208 100 406 100 604 100 802 100 100 The given data suggest that the amount of money demanded for transactions

is independent of the interest rate.

The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is the domestic demand curve. The world price of a T-shirt is $5. The U.S. government imposes a $2 per unit tariff on imported T-shirts.The figure above shows that as a result of the tariff, the price of a T-shirt in the United States ________, and the quantity of T-shirts bought ________.

ises by $2; decreases by 15 million per year

In terms of aggregate supply, a period in which nominal wages and other resource prices are fully responsive to price-level changes is called the

long run

Purchasing groceries using a debit card best exemplifies money serving as a

medium of exchange

The transactions demand for money is most closely related to money functioning as a

medium of exchange

If supporters of restrictions on imports argue that protection is needed to preserve a strategic industry, which of the following is being used?

national security argument

(Consider This) Credit card balances are

not a component of M1 or M2

When governments specify the maximum amount of a good that may be imported in a given period of time, they are establishing a

quota

A major advantage of the built-in or automatic stabilizers is that they

require no legislative action by Congress to be made effective.

Open-market operations refer to

the purchase or sale of government securities, as well as collateralized money loans, by the Fed.

The cyclically adjusted budget refers to

the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment

in the long run

there is no inflation-unemployment trade-off

The currency, or money, of the United States, like those of other countries, is

token money

In the extended analysis of aggregate supply, the short-run aggregate supply curve is

upsloping and the long run aggregate supply curve is vertical

asset demand for money

varies inversely with the rate of interest

Answer the question on the basis of the given consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 20 percent. All figures are in billions. Reserves:$200 Checkable Deposits:$1,000 Securities:300 Stock Shares: 400 Loans:500 Property:400 The commercial banking system has excess reserves of

zero

The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of an airplane is $150 million. In the figure above, U.S. consumers buy ________ airplanes per year at ________ million per airplane.

200,$150

Answer the question on the basis of the given consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 20 percent. All figures are in billions. Reserves:$200 Checkable Deposits:$1,000 Securities:300 Stock Shares:400 Loans:500 Property:400 The monetary multiplier for the commercial banking system is

5

The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of a T-shirt is $5. In the figure above, with international trade U.S. consumers buy ________ million T-shirts per year at ________ per T-shirt.

60,$5

Refer to the diagram. The long-run aggregate supply curve is

A

Interest Rate Transactions Demand for Money Asset Demand for Money Money Supply 2% $220 $300 $4604 220 280 4606 220 260 4608 220 240 46010 220 220 460 Based on the given table, an increase in the money supply of $20 billion will cause the equilibrium interest rate to

fall by 2 percentage points.

The interest rate that banks charge one another on overnight loans is called the

federal funds rate

The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of a T-shirt is $5. In the figure above, with international trade the United States ________ million T-shirts per year.

imports 40