Macro 2

Short-term securities are usually called ________ and long-term securities are usually called ________.

bills; bonds

In 2016, the city of Miketown collected $250,000 in taxes and spent $350,000. In 2016, the city of Miketown had a

budget deficit of $100,000

In 2016, the city of Canfield collected $500,000 in taxes and spent $450,000. In 2016, the city of Canfield had a

budget surplus of $50,000

In a closed economy with no government, aggregate expenditure is

consumption plus investment

When the Fed raises the required reserve ratio, the banks' excess reserves will initially ________ and the money supply ________.

decrease; decreases

If Wanda's income is reduced to zero after she loses her job, her consumption will be ________and her saving will be ________

greater than zero; less than zero

As the MPS decreases, the multiplier will

increase

Tax revenues...

increase during recessions

Disposable income

increases when income increases

When a government runs a surplus

its debt decreases

The development of money as a medium of exchange has facilitated the expansion of trade because

money eliminates the "double coincidence of wants" problem

The price of bonds and the interest rate are

negatively related

If unplanned inventory investment is positive, then

planned aggregate spending must be less than aggregate output

The economy can be in equilibrium if, and only if

planned investment equals actual investment

A change in inventory is equal to

production - sales

During an economic expansion, income ________, unemployment benefits ________ and the budget deficit ________.

rises; fall; falls

A government's debt is reduced when it

runs a surplus

Veronica received a federal income tax refund of $600 in May 2016. Veronica put this money in a saving account so that she could spend it when she went on vacation in July 2016. This is an example of money serving as a(n)

store of value

If the economy's full-employment output is $9 trillion, actual output is $9 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a

structural deficit

Which of the following instruments is not used by the Federal Reserve to change the money supply?

the federal tax code

When money is used as a medium of exchange

the need for a barter system diminishes

Which of the following is an investment?

the purchase of a new printing press by a business

The Fed uses open market operations to

to buy or sell govt securities

Electro City, a retailer of electronics, has 2,000 different products in inventory. Electro City reports its inventory is worth $12 million. This is an example of using money as a

unit of account

When the manager of a department store attaches price tags to his/her products, he/she is using money as a

unit of account

If aggregate output is greater than planned spending, then

unplanned inventory investment is positive

A decrease in the required reserve ratio

will increase the money supply

If you save $80 when you experience a $400 rise in your income

your MPC is 0.80

Assume there is no government or foreign sector. If the multiplier is 10, a $10 billion increase in planned investment will cause aggregate output to increase by

$100 billion

Thompson National Trust has assets of $500,000 and liabilities of $400,000. Thompson National Trust's net worth is

$100,000

Assume that in Jabara, planned investment is $30 billion, but actual investment is $45 billion. 11) Unplanned inventory investment is

$15 billion

Suppose saving is $1,400 when income is $10,000 and the MPC equals 0.8. When income 6) increases to $12,000, saving is

$1800

Assume there is no government or foreign sector. If the MPS is 0.2, a $40 billion decrease in planned investment will cause aggregate output to decrease by

$200 billion

In 2016 Happyland's planned investment was $90 billion and its actual investment was $140 12) billion. In 2016 Happyland's unplanned inventory change was

$50 billion

Bill's income is $1,000 and his net taxes are $350. His disposable income is

$650

Assume that in Scandia, planned investment is $80 billion but actual investment is $60 billion. Unplanned inventory investment is

-$20 billion

Assume that in Narnia, planned investment is $80 billion but actual investment is $50 billion. Unplanned inventory investment is

-$30 billion

The Jackson Tool Company manufactures only tools. In 2016 Jackson Tools manufactured 20,000 8) tools, but sold 21,000 tools. In 2016 Jackson Tools' change in inventory was

-1,000 tools

if consumption is $30,000 when income is $35,000, and consumption increases to $36,000 when 5) income increases to $43,000, the MPC is

0.75

Assuming no government or foreign sector, the formula for the multiplier is

1/MPS

The Tiny Tots Toy Company manufactures only sleds. In 2016 Tiny Tots manufactured 10,000 7) sleds, but sold only 8,000 sleds. In 2016 Tiny Tots' change in inventory was

2,000 sleds

If Inventory investment is higher than firms planned

actual investment is greater than planned investment

A loan made by a bank is considered ________ of that bank.

an asset

An open-market purchase of securities by the Fed results in ________ in reserves and ________in the supply of money.

an increase; an increase