econ chp 8
the slope of a consumption function is
Equal to the MPC
As real disposable income increases, consumption expenditures _____ and savings _____.
Increase, increase
induced expenditure includes _____.
Induced consumption expenditure and imports
the slope of a consumption function is
less than 1
which of the following is an asset from the fed?
loans to the depositary institutions
If you use $500 of currency to make a deposit in a saving deposit
m1 decreases but m2 remains unchanged
the definition of m2 includes:
m1, money market mutual funds, currency held outside of banks
When you buy a hamburger for lunch, you are using money as a
medium of exchange
the functions of money exchange are
medium of exchange, unit of account, and store value
reserve requirments are the
minimum percentages of deposits that banks must hold as reserves
in a barter system, we should see
money and goods exchanged for each other
the multiplier effect occurs becuase
an autonomous change in the expenditure causes an induced change in consumption expenditure.
an increase in the size of the multiplier can be caused by
an increase in MPC
the quantity theory of money is the idea that in the long run
an increase in the growth rate of the quantity of money leads to an equal increase in the inflation rate
a depository institution is best defined as
as an institution that accepts deposits and makes loans
the commerical banks on sunny island have checking deposits of $4 million, reserves of $600,000, and loans of $2.4 million. the desired reserve ratio is 10%. the banks have ____ of desired reserves and ____ of excess reserves.
b
in the shortrun, when the fed increases the quantity of money
bind prices rise and interest rate falls
bank reserves include -cash in banks vault -banks deposite by fed reserve
both
in an open market the fed ___ government securities which ____ bank reserves.
buys, increases
33 picture
c
picture 32
c
when actual reserve exceeds desired reserves, the bank
can lend out additional funds
which of the following are parts of a commercial bank's reserveS?
cash in banks vaults
which of the following is money?
checking deposits
the federal reserve system
controls the amount of money in circulation
the effect of an increase on the nominal interest rate on the demand for money curve is to
create a movement upward along the demand curve for money
74 pic
d
76 table
d
whoch of the following decreases the demand for nominal money?
decrease in the price level
the federal open market committee
determines the feds monetary policy
an increase in the price level results in a
downward shift in the AE curve and a movement up along the AD curve
which of the following is not a monetary policy tool?
federal funds rate
the largest influence on the feds monetary policy actions is
held by the board of governors
an increase in the nominal interest rate _____ the money demand curve and an increase in real gdp creates a ____ the money demand curve.
movement up along, rightward shift of
the quantity theory asserts that real gdp is
not influnced by quantity of money
monetary policy is conducted
only the federal reserve
the slope of the aggregate expenditure curve equals the change in
planned expenditure divided by the change in real GDP
a consumption function shows a
positive (direct) relationship between consumption expenditure and disposable income
when the interest rate rises, the
quantity of money demanded decreases
the quantity of money people want to hold increases if
real gdp increases
fed reserve system
regulates the nations financial institution and conducts the nations monetary policy
examples of thriftting institutions include
savings and loans associations, savings banks, and credit unions
which of the following is NOT included in the M1 measure of money?
savings deposits
any change in the price level will result in a
shift in the AE gurve and a movement along the AD curve
a decrease in autonomous consumption will
shift the aggregate expenditure function downward
an open market operation involves
the Federal Reserve's purchase or sale of government securities
the velocity of circulation is
the average number of times a dollar of money is used annually to buy the goods and services in gdp
a banks reserves include
the cash in its vault plus its deposits held at a Federal Reserve bank
the interest rate banks charge other banks for overnight loans is
the federal funds rate
the monetary policy making body of the federal reserve is the
the federal open market committee
which of the following best describes the chain of events in the money creation process?
the monetary base increases. banks acquire excess reserves which they loan out, increasing deposits and also the quantity of money . the new deposits then create additional excess reserves.
the opportunity cost of holding money balances rather than other assets is
the nominal interest rate
an increase in _____ shifts the AE curve _____ and an increase in ______ shifts the aggregate demand curve _____.
the price level, downward, autonomous expenditure, rightward
If prices are fixed, when aggregate planned expenditure exceeds real GDP, then
inventories decrease, signaling firms to increase production and increase real GDP
Autonomous consumption
is independent of income
the quantity theory of money predicts how changes in
the quantity of money affect the price level
The keynesian model of aggregate expenditure describes the economy as
the short run
the reserve ratio is a banks reserves as a fraction of its
total deposits
the marginal propensity to import defines the relationship between changes in imports and changes in _____.
Real GDP
if the multiplier is 4.0 and investment decreases by $2.5 billion, the AD curve
Shift leftward by $10 billion
the larger the multiplier, the _____ the AE curve and the _____ the AD curve from an incrase in investment.
Steeper, larger the shift in
suppose the slope of the AE curve is .8. then an increase of investment of $10 billion leads to an increase in equilibrium real GDP equal to
$50 billion
(pic 41) 43 in the figure above, if real GDP is greater than $300 billion, inventories will be
A
32 figure chp 11
A
44 pic
A
suppose the money growth rate is 3%, velocity is constant, and real gdp is growing at 2%. what os the inflation rate?
A
in an economy with no income taxes or imports, the multiplier equals
1/MPS
the fed reserve has _____ regional Fed reserve banls and _____ members of the board of governors.
12;7
If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier is
2
suppose M=300, P=150, and y=6, then the velocity of circulation is
3
34 picture
B
45 pic
B
54 pic chp 11
B
62 pic chp 11
B
this group consists of seven members appointed by the presidnet for a 14 year term
Board of governors
(pic 41) 42 In the figure above, autonomous expenditure is
C
30 chp 11
C
33 figure chp 11
C
41 pic chp 11
C
aggregate expenditure equals
C+I+G+(X-M)
the monetary base does not include
Checking accounts in commercial banks
73 pic
a
the componets of aggregate expenditure include: imports consumption gov transfer payments
imports and consumption
which of the following shifts the aggregate demand curve rightward?
in increase in government expenditure
Disposable income is
income minus taxes plus transfer payments
in the short run, with fixed prices and no imports and no income taxes, an increase in investment of $100 billion
increase in real gdp by more than $100 billion
when the price level rises, the quantity of nominal money demanded will ___ and the quantity of real money demanded will _____.
increase, stay the same
if the slope of the AE curve increases the multiplier
increases
the slope of the aggregate expenditure curve increases when the marginal propensity to consume _____ or the marginal propensity to import ______.
increases, decreases
