MACRO test 3, Macro ch 12 and 13

The table gives information about the relationship between input quantities and real domestic output in a hypothetical economy. The level of productivity in the economy is

2.

Last Word) In 1960 the ratio of workers to Social Security and Medicare beneficiaries was ______; by 2040 it is projected to be _________.

5:1; 2:1

In 2018, the U.S. federal debt held by the public was

76

In 2018, the U.S. federal debt held by the public was

76 percent

Which of the diagrams for the U.S. economy best portrays the effects of an increase in resource productivity?

A

Which of the following is a true statement?

A decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward.

MZM

A definition of the money supply that includes monetary balances immediately available at zero cost to households and businesses for making transactions. Equals M2 minus small time deposits plus money market mutual fund balances owned by businesses.

balance sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

unit of account

A means for comparing the values of goods and services

M2

A more broadly defined money supply, equal to M1 plus noncheckable savings accounts (including money market deposit accounts), small time deposits (deposits of less than $100,000), and individual money market mutual fund balances.

electronic payment

A payment that is transmitted electronically either over the telephone line, or between Web sites on the Internet.

In which of the following sets of circumstances can we confidently expect inflation?

Aggregate supply decreases and aggregate demand increases.

savings account

An account you have at a financial institution that helps you accumulate and save money and earn a small amount of interest at the same time.

store of value

An item that people can use to transfer purchasing power from the present to the future

legal tender

Any kind of money that a creditor must by law accept in payment for debts

commercial banks

Privately owned financial institutions that accept demand deposits and make loans and provide other services for the public

Refer to the figure. Suppose that the economy is currently operating at the intersection of AS and AD2 and that the full-employment level of output is Y. If contractionary fiscal policy and accompanying multiplier effects move aggregate demand from AD2 to AD1, what will be the effect on real GDP and the price level?

Real GDP will fall to X and the price level will remain unchanged, assuming prices are inflexible downward.

excess reserves

Reserves greater than the required amounts

Which of the following fiscal policy changes would be the most expansionary?

a $40 billion increase in government spending

If the MPC in an economy is 0.8, government could shift the aggregate demand curve rightward by $100 billion by

decreasing taxes by $25 billion.

The economy's long-run AS curve assumes that wages and other resource prices

eventually rise and fall to match upward or downward changes in the price level.

near-monies

financial assets, the most important of which are noncheckable savings accounts, time deposits, and U.S. short-term securities and savings bonds, which are not a medium of exchange but can be readily converted into money

thrift institutions

financial institutions that receive most of their funds from the savings of the public; they include savings banks, savings and loan associations, and credit unions

Suppose the federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $20 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the federal government's public debt would have

increase 20

Given a fixed upsloping AS curve, a rightward shift of the AD curve will

increase both the price level and real output.

In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To obtain price-level stability under these conditions, the government should

increase tax rates and/or reduce government spending.

Refer to the diagram, in which Qf is the full-employment output. If aggregate demand curve AD3 describes the current situation, appropriate fiscal policy would be to

increase taxes and reduce government spending to shift the aggregate demand curve leftward from AD3 to AD2, assuming downward price flexibility.

In the accompanying figure, if AD1 shifts to AD2, then the equilibrium output

increases from Q1 to Q2 while the price level rises from P1 to P2.

An increase in the public debt and its subsequent repayment will tend to

mildly increase the income inequality in the United States.

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called ______ fiscal policy.

nondiscretionary

If you were told that the government had an actual budget deficit of $50 billion, then you would

not be able to determine the direction of fiscal policy from the information given.

An aggregate supply curve represents the relationship between the

price level and the production of real domestic output.

In the diagram, a shift from AS3 to AS2 might be caused by an increase in

productivity

The crowding-out effect from government borrowing to finance the public debt is reduced when

public investment complements private investment.

The goal of expansionary fiscal policy is to increase

real gdp

The effect of expansionary fiscal policy is shown as a

rightward shift in the economy's aggregate demand curve.

The table gives information about the relationship between input quantities and real domestic output in a hypothetical economy. Suppose that the price of each input increased from $5 to $8. The per-unit cost of production in the economy would

rise by 60 percent, and the aggregate supply curve would shift to the left.

time deposits

savings plans that require savers to leave their funds on deposit for certain periods of time

The accompanying graph depicts an economy in the

short run

Federal Reserve Banks

the 12 banks chartered by the U.S. government to control the money supply and perform other functions

When current government expenditures exceed current tax revenues and the economy is achieving full employment,

the cyclically adjusted budget has a deficit.

Since 2009, when actual budget deficits were nearly 10 percent of GDP,

the deficits as a percentage of GDP have fallen, but fiscal policy has remained expansionary.

The cyclically adjusted budget estimates the federal budget deficit or surplus if

the economy were at full employment.

actual reserves

the funds that a bank has on deposit at the federal reserve bank of its district (plus its vault cash)

The cyclically adjusted budget refers to

the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment.

2018

21.5 trillion

In the accompanying table for a particular country, C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. If the equilibrium level of real GDP is $43 billion, its level of consumption will be

26

Refer to the graph. Which of the following factors will shift AD1 to AD3?

a decrease in consumer wealth

money market mutual find

a fund that pools money from small savers to purchase short-term government and corporate securities

token money

coins of regular issue whose face value is greater than their intrinsic value

Refer to the figure. If the economy is operating at full employment when its aggregate demand curve is AD2, then a further increase in consumption and investment spending will cause

demand-pull inflation, and the new equilibrium output will be more than Q2.

The size of the multiplier associated with an initial increase in spending will be

diminished if inflation occurs.

Refer to the diagram, in which Qf is the full-employment output. If aggregate demand curve AD1 describes the current situation, appropriate fiscal policy would be to

reduce taxes and increase government spending to shift the aggregate demand curve from AD1 to AD2.

The determinants of aggregate supply

include resource prices and resource productivity.

M1

A measure of money that includes currency, traveler's checks, and checkable deposits.

Federal Reserve Notes

Paper money used in the United States that is issued by the Federal Reserve System.

Refer to the diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD3 to AD2 is consistent with

contractionary fiscal policy.

Refer to the table for a fictional economy. The changes in the budget conditions between Year 4 and 5 best reflect a(n)

contractionary fiscal policy.

vault cash

currency that is physically held by banks and stored in vaults overnight

Suppose the federal government had budget surpluses of $80 billion in year 1 and $120 billion in year 2 but had budget deficits of $10 billion in year 3 and $40 billion in year 4. Also assume that it used its budget surpluses to pay down prior years of the public debt. At the end of these four years, the federal government's public debt would have

decrease 150

Actions by the federal government that decrease the progressivity of the tax system

decrease automatic

Cost-push inflation is characterized by a(n)

decrease in aggregate supply and no change in aggregate demand.

The set of fiscal policies that would be most contractionary would be a(n)

decrease in government spending and an increase in taxes.

money market deposit account

account that pays relatively high rates of interest, requires a minimum balance, and allows immediate access to funds

The U.S. economy was able to achieve full employment with relative price level stability between 1996 and 2000 because

aggregate demand increased and aggregate supply increased.

Which of the following fiscal policy actions is most likely to increase aggregate supply?

an increase in government spending on infrastructure that increases private sector productivity

Which one of the following might offset a crowding-out effect of financing a large public debt?

an increase in public investment

Which of the following would most likely shift the aggregate demand curve to the right?

an increase in stock prices that increases consumer wealth

checkable deposits

any deposit in a commercial bank or thrift institution against which a check may be written.

Refer to the diagram, in which T is tax revenues and G is government expenditures. All figures are in billions. If GDP is $400,

balanced

A decrease in aggregate demand in the short run will reduce

both real output and the price level.

Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that

help offset changes in GDP.

Board of Governors

Appointed by the President, confirmed by the Senate - their duty is to operate America's banking system. 7 member group

In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government spending by

$20 billion.

n the accompanying table for a particular country, C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. If the equilibrium level of real GDP is $43 billion, its level of consumption will be

$26 billion.

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. A recession is depicted by

A and B

fractional reserve banking system

A banking system that keeps only a fraction of funds on hand and lends out the remainder

Federal Reserve System

A quasi-governmental organization formed to regulate the money supply and help keep the economy stable

Which of the diagrams for the U.S. economy best portrays the effects of an increase in resource productivity?

D will decrease

Refer to the diagram. If the initial aggregate demand and supply curves are AD0 and AS0, the equilibrium price level and level of real domestic output will be

F and C, respectively.

Refer to the diagram. If aggregate supply is AS1 and aggregate demand is AD0, then

F represents a price level that would result in a shortage of real output of AC.

financial services industry

Financial institutions that help consumers, businesses, and governments manage money. These institutions can be depository or not.

Which of the following is not an important problem associated with the public debt?

Government borrowing to finance the debt may lead to too much private investment.

required reserves

Reserves that a bank is legally required to hold, based on its checking account deposits

reserve ratio

The fraction of deposits that banks hold as reserves

Federal funds rate

The interest rate at which banks make overnight loans to one another

Federal Open Market Committee

the 12 member group that determines the purchase and sale policies of the Federal Reserve Banks in the market for U.S. government securities

The table contains budget information for a hypothetical economy. All data are in billions of dollars. In which year is there a budget surplus?

1

The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. The budget deficit in year 3 is

100 billion

in the accompanying table for a particular country, C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. If equilibrium real GDP is $31 billion, the equilibrium price level will be

122

in the accompanying figure, a shift from AD2 to AD1 would be consistent with what economic event in U.S. history?

2007-2009

In the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is _____, and its long-run AS curve is line ______.

3,2,1

Answer the question based on the accompanying list of items related to aggregate demand or aggregate supply. Changes in which combination of factors best explain why the aggregate supply curve would shift?

7 and 8

medium of exchange

Anything that is used to determine value during the exchange of goods and services

monetary multiplier

The multiple of its excess reserves by which the banking system can expand checkable deposits and thus the money supply by making new loans (or buying securities); equal to 1 divided by the reserve requirement.

If the dollar appreciates relative to foreign currencies, then

foreign buyers will find U.S. goods have become more expensive.

The shape of the immediate-short-run aggregate supply curve implies that

total output depends on the volume of spending.

Built-in stability means that

with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus, while a decline in income will result in a deficit or a lower budget surplus.

n the accompanying graph, which line might represent an aggregate demand curve?

1

In 2017, the public debt in the U.S. on a per capita basis was about

62,000

Which one of the following would not shift the aggregate demand curve?

a change in the price level

A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of

a change in the real value of consumer wealth.

The short-run aggregate supply curve shows the

direct relationship between the price level and real GDP produced.