Final Exam

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, andthe price of each input is $4. Given an increase in input price from $4 to $6, we would expect the aggregate A. supply curve to shift to the left. B. supply curve to shift to the right. C. demand curve to shift to the left. D. supply and demand curves to both remain unchanged

.C. demand curve to shift to the left

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demandcurve will shift A. leftward by $50 billion at each price level. B. rightward by $10 billion at each price level. C. rightward by $50 billion at each price level. D. leftward by $40 billion at each price level

.C. rightward by $50 billion at each price level.

With a marginal propensity to save of 0.4, the marginal propensity to consume will be A. 1.0 minus 0.4. B. 0.4 minus 1.0. C. the reciprocal of the MPS. D. 0.4.

A. 1.0 minus 0.4

An increase in net exports will shift the A. aggregate expenditures curve upward and the aggregate demand curve rightward. B. aggregate expenditures curve upward and the aggregate demand curve leftward. C. aggregate expenditures curve downward and the aggregate demand curverightward. D. aggregate expenditures curve downward and the aggregate demand curveleftward.

A. aggregate expenditures curve upward and the aggregate demand curve rightward

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 0 percent of real GDP to a deficit of 3 percent of real GDP. The government is engaging in a(n) A. expansionary fiscal policy. B. contractionary fiscal policy. C. an expansion of real GDP and an automatic increase in tax revenues (a neutral fiscalpolicy) D. low-interest-rate policy.

A. expansionary fiscal policy.

Usually a contraction of the money supply: A. increased the interest rate and decreased aggregate demand. B. increased both the interest rate and aggregate demand. C. lowered the interest rate and increased aggregate demand. D. lowered both the interest rate and aggregate demand

A. increased the interest rate and decreased aggregate demand

A commercial bank sells a Treasury bond to the Federal Reserve for $100,000. The money supply: A. increases by $100,000. B. decreases by $100,000. C. is unaffected by the transaction.

A. increases by $100,00

The greater is the marginal propensity to consume, the A. smaller is the marginal propensity to save. B. higher is the interest rate .C. smaller is the average propensity to consume. D. lower is the price level

A. smaller is the marginal propensity to save

The level of GDP and price will tend to increase when: A. reserve requirements are increased. B. there is an increase in the discount rate. C. the Federal Reserve buys government securities in the open market .D. the Federal Reserve sells government securities in the open market

C. the Federal Reserve buys government securities in the open market

The actual reason that banks must hold required reserves is :A. to enhance liquidity and deter bank runs. B. to help fund the Federal Deposit Insurance Corporation, which insures bank deposits. C. to give the Fed control over the lending ability of commercial banks. D. to help increase the number of bank loans.

C. to give the Fed control over the lending ability of commercial banks

A commercial bank has $100 million in checkable-deposit liabilities and $12 million in actual reserves. The required reserve ratio is 10 percent. How big are the bank's excess reserves? A. $100 million B. $88 million C. $12 million D. $2 million

D. $2 million

If the MPC in an economy is 0.75, government could shift the aggregate demand curve-leftward by $60 billion by A. reducing government expenditures by $12 billion. B. reducing government expenditures by $60 billion .C. increasing taxes by $15 billion. D. increasing taxes by $20 billion

D. increasing taxes by $20 billion

in a recessionary expenditure gap, the equilibrium level of real GDP is A. less than planned aggregate expenditures. B. greater than planned aggregate expenditures. C. greater than full-employment GDP. D. less than full-employment GDP

D. less than full-employment GDP

If consumers respond to a tax-cut by saving a large portion of the extra disposable income (orusing it to reduce their debts), then the tax-cut policy would A. shift the AE curve up significantly. B. shift the AE curve down. C. cause a reduction in aggregate spending. D. not have much effect on the aggregate expenditures curve.

D. not have much effect on the aggregate expenditures curve.

The $787 billion stimulus package enacted by the Federal government in 2009 to try to dealwith the Great Recession was intended to A. shift the aggregate expenditures schedule down. B. close an inflationary expenditures gap. C. bring inflation down. D. push the aggregate expenditures schedule upward

D. push the aggregate expenditures schedule upwards

The most important determinant of consumer spending is A. the level of household borrowing. B. consumer expectations. C. the stock of wealth. D. the level of income.

D. the level of income

Suppose that last year $30 billion in new loans were extended by banks while $50 billion in old loans were paid off by borrowers. What happened to the money supply? A. Increased B. Decreased C. Stayed the same

B. Decreased

Assume that Alex deposits $350 of currency in his account in the Wells Fargo bank.Later the same day, Giselle negotiates a loan for $2,000 at the same bank. In what direction and by what amounts has the supply of money changed? A. Increased by $2,350 B. Increased by $2,000 C. Decreased by $350 D. Decreased by $1,650

B. Increased by $2,000

Companies in the U.S. decide to purchase more capital equipment and expandoperations. Which of the following is the most likely to have caused this?A. The US$ appreciated.B. The Fed sold securities.C. The Fed bought securities.D. The price level went up.

B. The Fed sold securities

Which of the following represents the most expansionary fiscal policy? A. a $10 billion tax cut B. a $10 billion increase in government spending C. a $10 billion tax increase D. a $10 billion decrease in government spending

B. a $10 billion increase in government spending

Usually the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in targets for the :A. exchange rate. B. federal funds rate. C. prime interest rate. D. consumer price index.

B. federal funds rate.

Other things equal, a reduction in personal and business taxes can be expected to A. increase aggregate demand and decrease aggregate supply. B. increase both aggregate demand and aggregate supply. C. decrease both aggregate demand and aggregate supply. D. decrease aggregate demand and increase aggregate supply

B. increase both aggregate demand and aggregate supply.

A commercial bank has checkable deposit liabilities of $400,000, reserves of $150,000, and a required reserve ratio of 25 percent. The amount by which a single commercial bank and the amount by which the banking system can increase loans are, respectively: A. $50,000 and $100,000 B. $50,000 and $150,000 C. $50,000 and $200,000 D. $150,000 and $200,000

C. $50,000 and $200,000