Macro Exam 2

The ... and the ... determine tax revenues A. Value of transfer payments, money supply B. Income of households; value of transfer payments C. Money supply; income tax rate D. Income tax rate; income of households

D. Income tax rate; income of households

As the MPS decreases, the spending multiplier will ... A. Remain constant B. Decrease C. Either increase or decrease depending on the size of the change in investment D. Increase

D. Increase

Which of the following is considered investment? A. The sale of foreign currency B. The purchase of government bonds C. The purchase of IBM stock D. The acquisition of capital goods

D. The acquisition of capital goods

Which of the following is NOT considered investment? A. The acquisition of capital goods B. The construction of a new factory C. The increase in planned inventories D. The purchase of government bonds

D. The purchase of government bonds

An open market sale of securities by the FED results in ... in reserves and ... in the supply of money. A. an increase; an increase B. a decrease; an increase C. an increase; a decrease D. a decrease, a decrease

D. a decrease, a decrease

During an expansion, automatic stabilizers cause the federal deficit to ... A. remain unchanged B. increase C. either increase or decrease D. decrease

D. decrease

Violet's income is $3,200 a month. She deposits $600 in a savings account, buys $700 worth of government securities, and leaves the rest for daily transactions. Violet's money demand is ... A. $2,600 B. $2,500 C. $1,900 D. $4,500

C. $1,900

In 2006, Happyland's planned investment was $90 billion and its actual investment was $140 billion. in 2006 Happyland's unplanned inventory change was... A. - $50 billion B. $230 billion C. $50 billion D. - $115 billion

C. $50 billion

If Zach's saving function is of the form (S = 300 + 0.2Y), his consumption equals his income at an income level of ... A. 300 B. 600 C. 1,500 D. 1, 040

C. 1,500

Uncertainty about the future is likely to ... A. Increase current spending B. Have no impact on current spending C. Decrease current spending D. Either increase or decrease current spending

C. Decrease current spending

Economic growth is defined as an increase in ... A. Household consumption B. Real output C. Investment D. Nominal GDP

C. Investment

Things that a firm owns that have ... are classified as assets. A. No value B. Negative value C. Worth D. Any of the above

C. Worth

An example of an easy monetary policy is ... A. an increase in the discount rate B. an increase in the federal funds rate C. a decrease in the reserve requirement D. the FED selling government securities is the open market

C. a decrease in the reserve requirement

If Logan received a $2,500 bonus and his MPS is 0.20, his consumption rises by $... and his saving rises by $...

2,000; 500

If unplanned business investment is $45 million and planned investment is $45 million, then actual investment is ... A. 90 million B. 45 million C. Zero D. -45 million

A. 90 million

Planned aggregate expenditure increases when ... in the income-expenditure model: A. The government sector is included B. the government sector is excluded C. consumption is excluded D. investment is excluded

A. The government sector is included

If inventory investment is lower than firms planned... A. actual investment is less than planned investment B. actual investment is greater than planned investment C. actual and planned investment are equal D. actual investment must be negative

A. actual investment is less than planned investment

Brad details cars and Angelina babysits. Angelina agrees to babysit for Brad's kids if he details her minivan. This is an example of ... A. barter B. legal tender C. fiat money D. commodity money

A. barter

Disposable income ... A. decreases when income decreases B. increases when saving decreases C. decreases when net taxes decrease D. all of the above

A. decreases when income decreases

Related to the "Economics in Practice" on page 74; the tax rebate checks issued in 2008 are an example of ... A. discretionary fiscal policy B. balanced-budget policy C. contractionary fiscal policy D. contractionary monetary policy

A. discretionary fiscal policy

If the government spending multiplier is 6 and government spending increases by $30 billion, output will ... by $... billion. A. increase; 180 B. increase; 5 C. decrease; 5 D. decrease; 180

A. increase; 180

The most commonly used tool in monetary policy is... A. open market operations B. changes in the required reserve ratio C. changes in the discount rate D. express lending transactions

A. open market operations

From time to time, the Federal Reserve buys back government bonds from the private sector through a process called ... A. open market purchases B. backflip bond investments C. bond recall procedures D. voluntary redemption procedures

A. open market purchases

If unplanned inventory investment is negative, then... A. planned aggregate spending must be greater than aggregate output B. planned investment must be zero C. planned aggregate spending must equal aggregate output D. planned aggregate spending must be less than aggregate output

A. planned aggregate spending must be greater than aggregate output

When you keep your savings in a safety deposit box, you are using money as a(n) ... A. store of value B. unit of account C. investment good D. medium of exchange

A. store of value

If the MPS is 0.10, MPC is ... A. 0.80 B. 0.90 C. 1.00 D. 1.10

B. 0.90

If unplanned inventory investment is zero ... A. Aggregate output is less than planned aggregate expenditures B. Aggregate output equals planned aggregate expenditures C. Aggregate output is positive when planned aggregate expenditures are positive D. Aggregate output is greater than planned aggregate expenditures

B. Aggregate output equals planned aggregate expenditures

Which of the following policies has NOT been suggested as a means of increasing the rate of economic growth in the USA? A. Enactment of an industrial policy B. Lowering the savings rate C. Increasing research and development spending D. Reducing government regulation

B. Lowering the savings rate

Consumption is ... related to household income and wealth and household's expectations about the future, and ... related to interest rates. A. Positively; positively B. Positively; negatively C. Negatively; positively D. Positively; is not

B. Positively; negatively

Public subsidization of research and development has been justified on the grounds that ... A. Only large corporations have the financial resources to undertake research and development B. Social returns to research and development exceed the private returns. C. there are no private returns to research and development D. basic research cannot be undertaken by private firms

B. Social returns to research and development exceed the private returns.

M1 ... A. includes small time deposits B. is the narrowest definition of the money supply C. is the sum of currency plus travelers checks D. includes credit cards

B. is the narrowest definition of the money supply

If interest rates decrease to a very low level, people will most likely hold ... A. more bonds and more cash B. less bonds and more cash C. more bonds and less cash D. less bonds and less cash

B. less bonds and more cash

Bank of Roseland has $700 million in deposits. The required reserve ratio is $15%. Bank of Roseland must keep ... in reserves. A. $140 million B. $55 million C. $85 million D. $105 million

D. $105 million

The aggregate consumption function is C = 150 + .75Yd. If income is $500 and net taxes are zero, consumption equals ... A. 650 B. 350 C. 275 D. 525

D. 525