Macro Exam 4
An increase in government spending growth will cause the LRAS curve to: (a) remain unchanged. (b) first shift outward and then shift inward. (c) shift outward. (d) shift inward.
A
Bill Clinton's administration experienced a federal budget surplus. Which of the following is therefore correct? A The national debt held by the public decreased B The national debt reached record high levels. C Government expenditure was no longer counted as part of the federal budget. D The Federal budget was still in deficit, but the deficit was smaller in amount than in previous years.
A
Debt held outside the U.S. government is called the: (a) national debt held by the public. (b) debt-to-GDP ratio. (c) debt to foreign investor holdings. (d) total U.S. national debt.
A
If the reserve ratio is 4%, the Money Multiplier is: A 25 B 20 C 4 D 16
A
In the long run, a negative real shock will cause the inflation rate to: A increase B Become more difficult to predict C Remain unchanged D Decrease
A
The discount rate is the: A interest rate banks pay when they borrow directly from the Fed. B overnight lending rate on loans from one major bank to another. C Interest rate on short-term Treasury securities. D Ratio of reserves to Deposits.
A
The time necessary to determine that an economic problems is called the: A Recognition lag B Legislative lag C Effectiveness lag D Implementation lag
A
Tyler owes $100,000, but he owns Mexican Amati paintings that he could sell immediately for $80,000 or with a few months for $120,000. If these are all the assets and liabilities that Tyler has, Tyler is. A Solvent but illiquid B Solvent and liquid C Insolvent and illiquid D Insolvent and liquid
A
What is a reason it might be hard for the fed to restore aggregate demand in the face of a negative demand shock? A The fed must operate in real time when a lot of the data about the state of the economy are unknown. B Banks usually don't do what the fed demands of them. C The economy responds to the Feds actions with no lag. D The Fed might run out of money
A
When "C" falls, the LRAS curve: A Does not move. B Becomes flatter C Shifts to the right D Shifts to the left
A
The Medicaid Program offers health-care benefits for the: A Disabled only B Unemployed C Poor and disabled D Elderly and Disabled
C
An increase in government spending causes: (a) the aggregate demand curve to shift to the left. (b) the aggregate demand curve to shift to the right. (c) an upward movement along the aggregate demand curve. (d) a downward movement along the aggregate demand curve.
B
If the average reserve ratio in the banking system is 20% and the Fed increases bank reserves by $100,000, what will be the total potential increase in the money supply? A $2 million B $500,000 C $120,000 D $100,000
B
If the total liabilities of Bank A are less than its total assets but its short-term liabilities are greater than its short-term assets, Bank A is: A Liquid, But insolvent B Illiquid, But solvent C Both liquid and solvent D Both illiquid and insolvent
B
In the absence of any policy intervention, when C falls the result will be: (a) lower inflation and higher real growth. (b) lower inflation and real growth. (c) higher inflation and real growth. (d) higher inflation and lower real growth.
B
In the absence of monetary intervention following a negative shock to aggregate demand: A inflation will increase, real growth will decrease, and nominal wage growth will stay the same. B Inflation, real growth, and nominal wage growth will all decrease. C Inflation and real growth will decrease, but nominal wage growth will stay the same. D Inflation will decrease, but real growth and nominal wage will increase.
B
Suppose the reserve ratio is 20% for all banks. If the Fed increases bank reserves by 200$, then the money supply will A increase by 400$ B increase by 1000$ C Decrease by 400$ D Decrease by 1000$
B
Suppose you are a married person with one child but your whole family earns less than $20,000 a year. Which of the following will supplement your income? A Alternative minimum tax B Earned Income tax Credit C Federal Insurance Contribution act D Social Security
B
Systemic risk is present when: A The Fed increases the money supply when it should decrease it. B The failure of one financial institution will bring down other institutions as well C A bank or other financial institution acts recklessly, hoping that the Fed and regulators will later bail them out. D The US government defaults on Treasury securities.
B
The Federal Funds rate is the: A interest rate on short-term Treasury securities. B overnight lending rate on loans from one major bank to another. C interest rate banks will pay when they borrow directly from the Fed. D ratio of reserves to deposits.
B
The Medicare programs offers health-care benefits for the: A Poor and Disabled B Elderly C Poor D disabled only
B
The annual difference between federal spending and revenues is called the: (a) national debt. (b) national deficit. (c) debt held by the public. (d) debt-to-GDP ratio.
B
The maximum amount of time that a person can receive welfare payments is ______ during a lifetime A 10 years B 5 years C 25 years D 2 years
B
The time necessary for Congress to propose and pass a fiscal policy plan called the: A Implementation lag B Legislative lag C Effectiveness lag D Recognition lag
B
The time necessary for a fiscal policy to have an impact is called the: A Implementation lag B Effectiveness lag C Legislative lag D Recognition lag
B
To offset the effect of negative growth in money velocity "V" The central bank should: A Apply a policy that reduces the growth in money supply. B Increase the growth rate of the money supply C Decrease the growth rate of the money supply D Apply a policy that stabilizes the growth in money velocity.
B
What is the overnight lending rate from one bank to another? A The money multiplier B The Federal Funds rate C The money market rate D The Federal Reserve Rate
B
When the Fed buys bonds, it increases the demand for bonds, which pushes: A up the price of bonds, thus raising the interest rate. B up the price of bonds, thus lowering the interest rate. C down the price of bonds, thus raising the interest rate. D down the price of bonds, thus raising the interest rate.
B
When the government conducts fiscal policy, it makes up for a decrease in "C" with: A An increase in "M" B An increase in "G" C A decrease in "NX" D A decrease in "Yr"
B
When the text refers to the current US national debt, it means the: A Total debt held by foreign governments B National debt held by the public C Public debt held by investors D Private debt held by households
B
Which asset would you classify as the most liquid? A a home B Demand deposits C Small-time deposits D Gold bullion
B
Which is NOT a function of the Federal Reserve? A Serving as the lender of last resort B Providing loans to small businesses C Regulating the US money supply D Regulating the US financial system
B
Which is not included in the US money supplies M1 and M2? A savings deposits B Bond mutual funds C Checkable deposits D Currency in circulation
B
Which of the following limits the effectiveness of fiscal policy? A Free riding behavior B Crowding out C The multiplier effect D The big bucket effect
B
Which of these would help a government fight a recession? A raising taxes B Cutting taxes C Paying down the national debt D Cutting speeding
B
Many economists worry about the Federal reserve overstimulating the economy because such overstimulation will lead to rising. A Inflation B unemployment C Solow Growth D Output Growth
A
One of the Fed's greatest powers is the ability to: A Boost market confidence B Always keep a nation on its LRAS curve. C Perfectly control the supply of M1 and M2 D Help stabilize commodity prices
A
The intended effect of an expansionary monetary policy is that aggregate demand: A increases, raising real GDP growth in the short-run, but only inflation rises in the long run. B increases, raising inflation and real GDP growth in both the short run and the long run C remains unchanged while the economy's long-run potential growth rate increases D increases, raising real GDP growth only in the long run
A
The largest source of revenue for the US federal government is A the individual income tax B Social Security and Medicare taxes C excise taxes, such as taxes on gasoline and alcohol D the corporate income tax
A
The main difference between M1 and M2 is that: A M2 includes some less liquid assets in addition to the assets in M1 B M1 includes more liquid assets in addition to the assets in M2 C M2 includes more liquid assets in addition to the assets in M1 D M1 includes some less liquid assets in addition to the assets in M2
A
The purpose of FICA taxes is to fund A Social Security payments. B presidential campaigns. C defense expenditures. D health services for elderly people.
A
What monetary policy philosophy is against typing the hands of the central banks? A Discretion B Rules C Inclination D prudence
A
Which of the following statements about the social security program is correct? A women, who generally live longer than men, benefit more from the system. B The earlier you retire, the greater the benefits you receive from the social security systems. C On average, retirees in the united states receive about $8,000 per month in social security payments. D Your social security withholdings from your paychecks are deposited into an account for you.
A
____________ refers to the Federal Reserve's purchase of longer-term government bonds or other securities. A Quantitative easing B An open market purchase C Quantitative tightening D An open market sale.
A
A country has two income tax brackets: people pay 10% on their first $50,000 and 20% on everything they earn over $50,000. If someone earns $75,000, what is that person's marginal tax rate? A 10% B 15% C 20% D 13.3%
C
An asset that without loss of value can be quickly converted into money: A is nonexistent B is housing C is a liquid asset D Must rise in value over time
C
An increase in the money supply typically affects the economy with a lag that varies in time form: A 18 to 36 months B 1 to 2 months C 6 to 18 months D 3 to 6 months.
C
Government spending on "Interest on the debt" refers to: A Spending by the US government on education and highways B Interest charged by the US government on loans to states for education programs C Interest paid to owners of government debt held by the public D interest charged by the US government for US Foreign aid to other countries.
C
If the Fed credits Alex's checking account with $8,000 and Alex's bank keep the entire $8,000 in the form of reserves instead of lending it out, how much does the money supply increase? A $1,000 B $64,000 C $8,000 D $0
C
If the Fed sells $200 million in government bonds, the total money supply will: A Decrease by exactly $200 million. B not change C decrease by more than $200 million D decrease by less than $200 million but more than $0 million
C
In the long run, a negative real shock will cause output growth to A Remain unchanged B Become more difficult to predict C Decrease D increase
C
Some economists argue that the Fed should commit to keeping "M" + "V" fixed at a particular value, say 5%, How would this rule require the Fed to respond in the event of a negative spending shock? A negative real shock? A Decrease "M"; increase "M" B increase "M"; decrease "M" C increase "M"; do nothing D increase "M"; increase "M"
C
The Federal Reserve's major tool(s) to control the money supply is (are): A Discount rate lending B Open market Operations C Open market Operations, Discount rate lending, and paying interest on reserves D Paying interest on reserves
C
The main cause of higher government spending in the future will be: (a) unemployment insurance and welfare spending. (b) spending on roads, bridges, and infrastructure. (c) Medicare, Medicaid, and Social Security. (d) national defense and foreign aid.
C
The marginal tax rate is the: A minimum tax rate paid on income in the US B tax rate paid on capital gains C tax rate paid on each additional dollar earned D average tax rate paid on all earned income
C
The primary tools of fiscal policy are: A money supply and money demand. B Government expenditure and money supply C Government expenditure and taxation D Taxation and interest rates.
C
To increase the money supply in the economy, the Fed would: A Carry out open market sales B Increase the Discount rate C Carry out open Market purchases and/or lower the discount rate D Carry out open market sales and/or raise the reserve ratio
C
When "C" falls, the aggregate demand curve: A shifts to the right B Becomes steeper C Shifts to the left D Cutting spending
C
Which is an example of quantitative easing by the Federal Reserve? A The Fed raises the money multiplier B The Fed purchases $100,000 worth of short-term government bonds C The Fed purchases $50,000 worth of long-term government bonds D The Fed lowers Interest rates
C
A country has two income tax brackets: people pay 10% on their first $50,000 and 20% on everything they earn over $50,000. If someone earns $75,000, what is that person's average tax rate? A 20% B 10% C 15% D 13.3%
D
A nominal GDP rule says ______ should always grow at a constant rate. A P B Yr C M D Mv
D
Automatic stabilizers are: (a) not very effective fiscal policy. (b) subject to significant lags. (c) a result of the United States' regressive tax system. (d) changes in fiscal policy that stimulate aggregate demand in a recession without the need for explicit action by policymakers.
D
If the Fed overreacts to a negative spending shock by increasing money growth too much: A Real GDP growth will increase more and inflation will increase less than the fed prefers. B Real GDP growth will increase less and inflation will increase more than the Fed prefers. C Both real GDP growth and inflation will decrease more than the Fed prefers. D Both real GDP growth and inflation will increase more than the Fed prefers.
D
The Federal Reserve can influence the economy by shifting: A The LRAS curve B The AD, SRAS, and LRAS curves C The SRAS Curve D The AD curve
D
The Risk that the failure of one financial institution can lead to the failure of other financial institutions is called A Moral hazard B Solvency Risk C liquidity Risk D Systemic Risk
D
The US social security tax (FICA) is an example of a: A Proportional tax B Flat tax C Progressive tax D Recessive tax
D
The largest spending program for the US federal government is A Medicare B Medicaid C unemployment insurance D Social Security
D
The main difference between Medicare and Medicaid is that Medicare covers medical care of: (a) the poor and disabled, while Medicaid covers medical care of the elderly. (b) full-time workers, while Medicaid covers medical care of part-time workers. (c) foreigners, while Medicaid covers medical care of only U.S. citizens. (d) the elderly, while Medicaid covers medical care of the poor and disabled.
D
The money you pay into social security goes to: A An individual account B a trust that earns interest to help pay your benefits C The investment fund of your choice D Pay current beneficiaries
D
The time between which an economic shock is recognized and when the government passes a plan to carry out a policy A Adjustment lag B effectiveness lag C Recognition lag D Legislative lag
D
The time necessary for government bureaucracies to carry out a fiscal policy plan is called the: A Legislative lag B Recognition lag C Effectiveness lag D Implementation lag
D
To reduce the money supply in the economy, the Fed would: A Carry out open market purchases and/or lower the discount rate. B Carry out open market sales and/or lower the discount rate. C Carry out open market purchases D Increase the Discount rate.
D
What are the four major limits to fiscal policy? A sticky wages, Ricardian equivalence, recognition lag, and crowding out. B Aggregate demand deficiency, unemployed resources, long-run expenses, and implication lag C Poor information, the multiplier effect, the bandwagon effect, and election timing D Crowding out, a drop in the bucket, a matter of timing, and real shocks.
D
What demographic change in the US will cause government spending to increase in the next 50 years? A Immigration will increase B Women will have fewer children C The population will be younger D The population older than 65 will grow.
D
Which refers to the decrease in private spending when government spending increases? (a) the automatic stabilizing effect (b) the timing effect (c) the multiplier effect (d) the crowding out effect
D
