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When countries replaced gold and silver coins with paper money exchangeable for certain amounts of precious metals, the monetary system evolved from using _____ money to using _____ money.

commodity; commodity-backed

Among the liabilities of banks are:

customers' deposits

If the marginal propensity to consume is 0.75 and government purchases of goods and services decrease by $30 billion, real GDP will:

decrease by $120 billion

Loans of reserves from one bank to another are made in the _____ market

federal funds

When banks borrow from and lend reserves to each other, they are participating in the _____ market

federal funds

Money that the government has ordered to be accepted as money is:

fiat money

The U.S. dollar is an example of:

fiat money

The national debt:

grows when the government runs a deficit

An increase in the price of imported oil leads to a _____ shock

negative demand

Which of the following is (are) a tool(s) of monetary policy used by the Federal Reserve?

open market operations; not government purchases of goods and services

If it looks as if a bank won't meet the Federal Reserve Bank's reserve requirement, normally it will first turn to the:

other member banks and borrow money at the federal funds rate

The long-run level of output is known as _____ output

potential

The medium-of-exchange function means that money is used:

to pay for goods and services

In the short run, wages and some prices are considered to be:

sticky

If the marginal propensity to consume is 0.9, then the government spending multiplier is:

10

If the marginal propensity to save is 0.1, then the government spending multiplier has a value of

10

The primary difference between M1 and M2 is that:

M2 includes savings deposits and time deposits, but M1 does not

A leftward shift of the aggregate demand curve may have been the result of:

a decrease in investment spending following pessimistic GDP forecasts

Suppose the equilibrium aggregate price level is rising and the equilibrium level of real GDP is falling. Which of the following MOST likely caused these changes?

a decrease in short-run aggregate supply

An increase in government spending on health care is likely to shift the _____ curve to the _____

aggregate demand; right

Increasing the quantity of money in circulation shifts the _____ curve to the _____

aggregate demand; right

If the economy is at potential output and consumption spending suddenly decreases because of a fall in consumer confidence, the appropriate fiscal policy is:

an increase in government spending

Policy makers use a contractionary fiscal policy when they want to close:

an inflationary gap

If the economy is in a recessionary gap, actual output will be _____ potential output

below

When the government has a deficit, it will most likely finance the deficit by:

borrowing the money

In the long run, changes in the aggregate price level will be accompanied by _____ proportional changes in input prices

equal

The three consequences of the decline in demand during the Great Depression were _____ prices, _____ output, and a surge in unemployment.

falling; declining

The short-run aggregate supply curve is positively sloped because:

higher prices lead to higher profit and higher output

A leftward movement of the aggregate demand curve could be caused by:

higher tax rates

The short-run aggregate supply curve slopes upward because a _____ aggregate price level leads to _____

higher; higher output, since most production costs are fixed in the short run

Suppose the Federal Reserve were to buy $100 million of U.S. Treasury bills. The money supply would:

increase by more than $100 million

If the government spends an extra $5 billion on goods and services, GDP will:

increase by more than $5 billion

To _____ the money supply, the Federal Reserve could _____

increase; conduct open-market purchases

Expansionary fiscal policy:

increases aggregate demand

Assume that marginal propensity to consume is 0.8 and potential output is $800 billion. If the actual real GDP is $700 billion, _____ government spending by _____ would bring the economy to potential output

increasing; $20 billion

If the economy is at equilibrium above potential output, there is a(n) _____ gap, and _____ fiscal policy is appropriate

inflationary; contractionary

The short-run aggregate supply curve will shift to the:

left if nominal wages increase

If the Federal Reserve wants to increase the money supply, it could:

lower the reserve requirement

To decrease the money supply, the central bank could

make open-market sales

When the economy expands, income tax receipts will:

rise, and sales tax revenues will rise

The national debt _____ when the federal government incurs a _____

rises; deficit

A decrease in aggregate demand is seen as a(n) _____ the aggregate demand curve

shift to the left in

A general increase in wages will result primarily in the _____ curve shifting to the _____

short-run aggregate supply; left

Suppose a group of people decided to set up their own economic system with cartons of milk serving as money. If we decided to use this "liquid asset" as our medium of exchange and all prices were measured in cartons of milk, milk would still not be a good form of money mainly because it would not be a good:

store of value

A natural disaster that destroys part of a country's infrastructure is a type of negative _____ shock and therefore shifts the _____ curve to the _____

supply; short-run aggregate supply; left

"Tuition at State University this year is $8,000." Which function of money does this statement best illustrate?

unit of account


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