econ exam 2

if the reserve requirement is 2.5% the potential money multiplier is

40

__________ are all examples of mandatory spending.

Social Security, interest on the national debt, and Medicare

economic growth is shown as

a shift to the right of the long run aggregate supply curve

the curve that shows how much gdp is demanded at various price levels is called

aggregate demand

which of the following will not shift the aggregate supply curve to the right

an increase in minimum wage

money

anything that is accepted in exchange for other goods and services for payment of debt

interest charges accrue on top of existing debt and saving leads to substantial growth savings over the long run this is known as the

compounding effect

which of the following events will not cause a downward shift in the aggregate demand curve

consumers expect an economic contraction will soon occur

banks

create money by making loans using the deposits of their customers

___ lags are shorter for monetary policy than for fiscal policy

decision

financial institutions greatly increase the flow of funds to the economy by

depression information costs

fiat money

does not necessarily have an inteistic value but has been declared by a government to be money

which of these is not a policy tool of the federal reserve

fiscal policy

which of the filling items is not a determinant of aggregate demand

government saving

when home values collapsed in 2008, it reduced many americans

household wealth

suppose the economy is in a recession to increase demand using discretionary fiscal policy the government can

increase government spending or reduce taxes

An increase in the incomes of the countries that purchase us made products will cause an ___ in the ___ us made products

increase; aggregate demand for

suppose consumers spend more than usual. in the short run, output will ___ ; in the long run output will ___ from its starting point

increase; remain unchanged

an expansionary fiscal policy can result in

inflation and higher GDP

the ___ effect is a reason for the negative slope of the aggregate demand

interest rate

The reward for saving is called _____, and this variable is placed on the _____ axis of the loanable funds market graph.

interest; vertical

increased taxes will shift the aggregate demand curve to the ___ and ___ output demanded

left; decrease

suppose the economy enters a recession and income falls more than the demand for loanable funds. in this case the supply of loanable funds shifts __ and the equilibrium interest rate ___

left; rises

the financial panic and credit freeze in late 2008 pointed to the feds important role as a

lender of last resort

rising productivity will increase economic growth and raise the average standard of living shifting the ___ curve to the ___

long-run aggregate supply; right

If a bank is subject to a reserve requirement of 15%, then it is required to:

place 15% of its deposits in the account with its regional Federal Reserve bank or the vault.

high taxes and or heavy regulation:

raise costs of production so that the aggregate supply curve shifts to the left.

when banks hold excess reserves, they

reduce the actual money multiplier

if zachary deposits $500 cash into his checking account his banks assets then

rise by $500 and liabilities rise by $500

which list represents monetary policy actions that are consistent with one another

sell government bonds, raise reserve requirements, raise the discount rate

a problem with supply side fiscal policies is that they

take longer to implement than demand side fiscal policies

which of the following illustrates wealth effect

the jones family has 50,000 in a bank prices in the market rose dramatically diminishing their purchasing power by 50,000

the discount rate is

the rate regional Federal Reserve banks charge depository institutions to borrow reserves.

which of the following measures is not an example of discretionary fiscal policy

the unemployment compensation program pays out more money as the unemployment rates rise

which of the following is not an explicit short run goal of discretionary fiscal policy

zero unemployment