Macro 2

What happens if business expectations improve?

AD shifts right

In the US, monetary policy is controlled by

Federal Reserve

the ___ is vertical at full employment

Long run aggregate supply curve

Which of the following statements regarding discretionary and mandatory spending is correct?

Mandatory spending may act as automatic stabilizing force in the macro economy

which of the following is not correct?

Purchases of capital goods are excluded from GDP.

Aggregate Supply

The Real GDP that firms will produce at varying price levels

discretionary spending

The part of the budget that works its way through the appropriations process of Congress each year and includes national defense, transportation, science, environment, and income security.

which of the following measures is NOT an example of discretionary fiscal policy?

The unemployment compensation program pays out more money as the unemployment rate rises

disposable income is equal to

Y-T

Without government spending, which of the following is true?

Y=C+S

a bond is a

a certificate of indebtedness

A change in ones determinants of aggregate demand will cause the aggregate demand curve to shift. Which of the following will not cause a shift?

a change in the price level

the collapse of home values in 2008 led to ___ in Americans consumption and ___ in their saving rates

a decrease, an increase

the collapse of home values in 2008 led to ___ in Americans saving rates, shifting aggregate demand to the

a decrease, left

economic growth is shown as

a shift to the right in the long- run aggregate supply curve

excess reserves that banks keep

above the legally required amount

In the AD/AS model, the vertical axis is labeled

aggregate price level

in a system with fractional reserve banking

all banks must hold reserves equal to a fraction of their deposits

which of the following will NOT shift the aggregate supply curve to the right?

an increase in minimum wage

economists use the term money to refer to

assets used for transactions

the economy's two most important financial markets are

bonds and stocks

In a 100 percent- reserve banking system, banks

cannot affect the money supply

demand deposits are funds held in

checking accounts

to increase the monetary base, the fed can

conduct open-market purchases

monetary base consists of

currency held by the public, plus reserves held by banks.

the money supply consists of

currency plus demand deposits

If the federal reserve wishes to increase money supply, it should

decrease the discount rate

When the Fed makes an open-market sale, it:

decreases the monetary base (B)

The aggregate demand curve slopes ___ and has ___ on the vertical axis

downward, the price level

When home values collapsed in the period that began in 2008, it reduced many Americans':

household wealth

Which of the following categories is an example of discretionary spending?

hurricane relief funds

The $787 billion stimulus package passed in the United States in 2009 focused more on spending than on taxes primarily because

increased spending leads to a larger increase in GDP than does the same reduction in taxes

a falling aggregate price level ____ demand for a countrys exports and therefore ____ output demanded

increases; increases

__ government spending , __ transfer payments, and __ taxes are all examples of expansionary fiscal policy

increasing, increasing, lowering

Aggregate supply shifts to the left when

input prices rise

discretionary fiscal policy

involves adjusting government spending and tax policies with the express short-run goal of moving the economy toward full employment, expanding economic growth, or controlling inflation

when the fed increases the discount rate, it

is likely to decrease the monetary base (B)

The national economic objectives that the Fed attempts to achieve include all of the following actions except

keeping tax rates low

increased taxes will shift the aggregate demand curve to the ____ and _____ output demanded

left; decrease

in a fractional- reserve banking system, banks create money when they

make loans

a short run aggregate supply curve is positively sloped because

many input prices are slow to change in the short run

the primary economic function of the financial system is to

match one persons saving with another persons investment

Credit Cards

may affect the demand for money

Moneys liquidity refers to the ease with which

money can be converted into goods and services

Transfer payments are

monies paid directly to individuals by the government

the most frequently used tool of monetary policy is

open market operations

short-run aggregate supply curve

positively sloped because some input costs are slow to change

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

private saving is positive; public saving is negative

MPC

proportion of additional income that an individual consumes

the aggregate demand curve displays

real GDP demanded at various price levels.

a rising aggregate price level _____ an economy's interest rates and therefore ______ output demanded

reduces; increases

__ government spending , __ transfer payments, and __ taxes are all examples of contractionary fiscal policy

reducing, increasing, raising

decreased interest rates will shift the aggregate demand curve to the _____ and _____ output demanded

right; decrease

increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output

right; increase

to prevent banks from using excess reserves to make loans that would increase the money supply, the Federal Reserve could conduct open market___ and ___ the interest paid on bank reserves

sales; raise

given the lekeishas income exceeds her expenditures, she is best described as a

saver or a supplier of funds

If the government's expenditures exceeded its receipts, it would likely

sell bonds directly to the public

If a pill is discovered that allows people to work twice as fast as they would ordinarily work, then the aggregate supply curve will:

shift to the right

economic growth is shown as

shift to the right of the long-run aggregate supply curve

the aggregate demand curve

shows the amount of real GDP that will be demanded at each possible price level

Are examples of mandatory spending

social security, interest on the national debt, and medicare

Increased government__ leads to a larger increase in GDP when compared to the same reduction in __

spending, taxes

Aggregate supply

the amount of output that is sold at each price level

the long- run aggregate supply curve is vertical because

the economy will gravitate to the position of full employment when all variables are flexible

everything else being the same, if depositors decrease their balances in their checking accounts and increase their currency holdings

the money multiplier decreases

If you hear in the news that the Federal Reserve conducted open-market purchases, then you should expect ______ to increase.

the money supply

Aggregate Demand

the output of goods and services (real GDP) demanded at different price levels

Because wages are slow to change in the short run

the short run aggregate supply curve is positively sloped

Currency equals

the sum of coins and paper money

Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,

their investments are being financed by someone else's savings

in the US, bank reserves consist of

vault cash and deposits at the Federal Reserve

long-run aggregate supply curve

vertical at full employment

all of the following are considered major functions of money except as a

way to display wealth

GDP= C+I+G+(X-M)

when the economy is in eqaullibriam

advances in technology

will most likely increase the economys long run aggregate supply

advances in technology

will most likely increase the long-run aggregate supply

Which of the following is NOT an explicit short run goal of discretionary fiscal policy?

zero unemployment