Econ Final

If the multiplier is 3, then the MPC is

2/3

If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate

$10,000 of money

If M = 5,000, P = 5.5, and Y = 9,000, what is velocity?

10

Which of the following is an example of barter

A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

Which of the following does the Federal Reserve not do?

Conduct fiscal policy

Which of the following is included in both M1 and M2

Currency, demand deposits, and other checkable deposits

In which case can we be sure aggregate demand shifts left overall

People want to save more for retirement and the Fed decreases the money supply

Which of the following is not a function of money?

Protection against inflation

The supply of money increases when

The Fed makes open-market purchases

According to the classical dichotomy, which of the following increases when the money supply increases?

The nominal wage

If the stock market crashes, then

aggregate demand decreases, which the Fed could offset by purchasing bonds.

The price level rises in the short run if

aggregate demand shifts right or aggregate supply shifts left

Which of the following would cause stagflation

aggregate supply shifts left

In a system of 100-percent-reserve banking,

banks do not influence the supply of money

Which of the following are vertical?

both the long-run Phillips curve and the long-run aggregate supply curve.

Which of the following functions as both a store of value and a medium of exchange

cash but not stocks

If the Federal Open Market Committee decides to increase the money supply

creates dollars and uses them to purchase various types of stocks and bonds from the public.

The initial impact of an increase in an investment tax credit is to shift aggregate

demand right

If Y and V are constant and M doubles, the quantity equation implies that the price level

doubles

Fiscal policy affects the economy

in both the short and long run

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed sells $20 million worth of government bonds, bank reserves

increase by $20 million and the money supply eventually increases by $400 million.

In the short run, open-market purchases

increase investment and real GDP, and decrease interest rates.

The federal funds rate is the

interest rate at which banks lend reserves to each other overnight

Recessions come at

irregular intervals. During recessions investment spending falls relatively more than consumption spending.

When the Consumer Price Index decreases from 140 to 125

less money is needed to buy the same amount of goods, so the value of money rises.

A goal of monetary policy and fiscal policy is to

offset shifts in aggregate demand and thereby stabilize the economy

The principle of monetary neutrality implies that an increase in the money supply will increase

real GDP but not the price level.

If taxes fall, then aggregate demand shifts

right, making unemployment lower than otherwise.

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also either a

rise in output or a fall in velocity.

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a _______. The laptop's price is posted as $500. The $500 price illustrates money's function as a _____. You use the $500 to purchase the laptop. This transaction illustrates money's function as a __

store of value, unit of account, medium of exchange

The Federal Open Market Committee is

the group at the federal reserve that sets monetary policy

An increase in the expected price level shifts

the short-run aggregate supply curve to the left but does not affect the long-run aggregate supply curve.

In the long run, money demand and money supply determine

the value of money but not the real interest rate

In the short-run an increase in the costs of production makes

output fall and prices rise

If the Fed increases the money supply,

the interest rate decreases, which tends to raise stock prices

Aggregate demand includes

the quantity of goods and services the government, households, firms, and customers abroad want to buy.

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

$150