Econ test 3 study
Scenario 26-3. Assume the following information for an imaginary, open economy. Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private saving = $225; and national saving = $150. 10. Refer to Scenario 26-3. For this economy, government purchases amount to
$305. private saving (225)+ taxes (230)- national saving (150) = 305
Figure 33-11. 31. Refer to Figure 33-11. A movement from P1 and Y2, to P2 and Y1 would be consistent with
. stagflation.
If the price level increased from 120 to 130, then what was the inflation rate?
8.3 percent.
Figure 33-7. 18. Refer to Figure 33-7. If the economy starts at Y, then an expansion occurs at
V.
The aggregate supply curve is
vertical in the long run and slopes upward in the short run.
If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $20, then this bank
will be able to make new loans up to a maximum of $19.0.
Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is
1 and banks do not create money.
If P denotes the price of goods and services measured in terms of money, then
1/P represents the value of money measured in terms of goods and services.
If the reserve ratio is 8 percent, then the money multiplier is
12.5 mm= 1/R mm= 1/.80 = 1.25 move decimal over: .8-> 8 1.25-> 12.5 mm= 12.5
In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is
22.5 percent. money supply= reserves X mm mm= 1/22 or rr = 1/mm (80,000)/18,000 = (18,000Xmm) /18,000 mm=4.44
If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?
4 percent real interest rate = nominal interest - inflation rate so 6 = ni - (-2) + (-2) 4= ni
Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?
4.4 percent
Based on the quantity equation, if M = 8,000, P = 3, and Y = 12,000, then V =
4.5. mv=py
Which of the following statements is correct?
All items that are included in M1 are included also in M2.
M2 includes A currency. b. demand deposits.c. traveler's checks.
All of the above are correct.
. Which of the following best illustrates the unit of account function of money?
You list prices for candy sold on your Web site, www.sweettooth.com, in dollars.
. Which of the following shifts short-run aggregate supply right?
a decrease in the price of oil
From 2006 to 2008 there was a dramatic fall in the price of houses. If this fall made people feel less wealthy, then it would have shifted
aggregate demand left.
Other things the same, when the government spends less, the initial effect is that
aggregate demand shifts left.
Which of the following would cause prices and real GDP to rise in the short run?
aggregate demand shifts right
Which of the following would increase the price level?
an increase in the money supply.
If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by
buying bonds. This buying would increase the money supply.
Which of the following increase when the Fed makes open market purchases?
currency and reserves
If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports
decrease which shifts aggregate demand left.
In a closed economy, national saving is
equal to investment.
If the supply for loanable funds shifts to the right, then the equilibrium interest rate
falls and the quantity of loanable funds rises.
If the Fed increases the money supply, then 1/P
falls, so the value of money falls.
If people decide to hold more currency relative to deposits, the money supply
falls. The Fed could lessen the impact of this by buying Treasury bonds.
If an economy used paper currency as money, its money would be
fiat money, but not commodity money.
The idea of menu costs suggests that
firms alter prices more frequently as inflation increases.
In a system of 100-percent-reserve banking, the purpose of a bank is to
give depositors a safe place to keep their money.
Fiat money
has no intrinsic value.
Which of the following shifts aggregate demand to the right?
increases in the profitability of capital due perhaps to technological progress.
Suppose monetary neutrality holds and velocity is constant. A 4 percent increase in the money supply
increases the price level by 4 percent.
When the money supply decreases
interest rates rise and so aggregate demand shifts left.
When public saving falls by $2b and private saving falls by $3b in a closed economy,
investment falls by $5b. private savings + public savings
. If the discount rate is lowered then banks borrow
more from the Fed so reserves increase.
When the government goes from running a balanced budget to running a budget surplus,
national saving increases, the interest rate falls, and the economy's long-run growth rate is likely to increase.
In a closed economy, what remains after paying for consumption and government purchases is
national saving.
Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics?
only Curly Corporation's
During an economic expansion the economy experiences
rising employment and income.
. People go to the bank more frequently to reduce currency holdings when inflation is high. The sacrifice of time and convenience that is involved in doing that is referred to as
shoeleather cost.
Menu costs help explain
sticky-price theory.
Which of the following is not a determinant of the long-run level of real GDP?
stock prices.
Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then there is an excess
supply of money that is represented by the distance between points A and B.
Reserve requirements are regulations concerning
the amount of reserves banks must hold against deposits.
Suppose that the tires of a certain tire manufacturer are discovered to be defective. Other things the same, this news would cause
the demand for this company's stock to decrease, so the price would fall.
If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,
the dollar would depreciate which would cause aggregate demand to shift right.
The inflation tax refers to
the revenue a government creates by printing money.
When the Fed sells bonds
the supply of money decreases and so aggregate demand shifts left.
