Econ final
Which of the following is NOT correct about debt as a percent of GDP in the United States? Question options: A) The cost of World War II expanded the national debt to over 100% of GDP in 1946. Because the United States was the only major industrial power fully intact after the war, it was able to gradually reduce the debt load by selling goods to other major countries like Japan, France and Germany who were unable to produce them for themselves B) The Public Debt is expected to be close to 100% of GDP in 2016. However, the United States today does not have the economic edge it had at the end of World War II when it was able to gradually work its way out of a similar debt load. C) A 100% debt to GDP ratio is a massive problem because it makes the interest payment on the debt such a big portion of the federal budget, thus reducing the amount of money available to spend on needed government programs. D) A 100% debt to GDP ratio is no big deal because the United States can continue to spend beyond its means, run the debt to GDP ratio even higher and then easily pay off that debt without having to reduce government programs.
A 100% debt to GDP ratio is no big deal because the United States can continue to spend beyond its means, run the debt to GDP ratio even higher and then easily pay off that debt without having to reduce government programs.
Which of the following is NOT true? Question options: A) A Recessionary Gap occurs when equilibrium is reached at a level of output less than Potential Output. B) A Recessionary Gap can be cured by an increase in Aggregate Demand that is sufficient to increase real GDP to its level of Potential Output. C) Because of the Simple Spending Multiplier, the necessary amount of new government spending is much less than the amount of the Recessionary Gap. D) A Depressionary Physical Gap is shown by an intersection of Aggravated Demand and Aggravated Supply to the right of the Potential Output line.
A Depressionary Physical Gap is shown by an intersection of Aggravated Demand and Aggravated Supply to the right of the Potential Output line.
Which of the following correctly identifies the impact of a deficit in the short run? Question options: A) A deficit decreases national saving in the short run, which hinders economic growth. B) A deficit adds to the national debt and always causes unemployment to rise considerably in the short run. C) A deficit stimulates aggregate demand in the short run by increasing government spending and reducing taxes, which can reduce some of the worst effects of a recession. D) A deficit reduces aggregate demand in the short run, lowers the employment rate and decreases the decade average of the national debt.
A deficit stimulates aggregate demand in the short run by increasing government spending and reducing taxes, which can reduce some of the worst effects of a recession.
What is a "fractional reserve" banking system? Question options: A) A fractional reserve banking system requires banks to hold 100% of all deposits to meet the day to day demands of depositors. B) A fractional reserve banking system is one that only pays depositors a fraction of the true value of using their deposits to make loans to borrowers. C) A fractional reserve banking system limits its central bank to lending only in fractional increments, such as a .50 or .75 discount rate. D) A fractional reserve banking system only requires banks to hold a tiny fraction of all deposits in the form of reserves. This allows them to lend out the rest, which serves to expand the money supply and promote investment, jobs and economic growth.
A fractional reserve banking system only requires banks to hold a tiny fraction of all deposits in the form of reserves. This allows them to lend out the rest, which serves to expand the money supply and promote investment, jobs and economic growth.
Which of the following is NOT correct about a fractional reserve banking system? Question options: A) A fractional reserve banking system requires that the full fraction (100%) of all deposits made at a bank be held safely in the form of cash or government securities in order to fulfill depositor's withdrawal demands. B) A fractional reserve banking system only requires a small fraction (usually 7-10%) of total deposits to be held by each bank. C) It is the fractional reserve banking system that empowers banks to essentially "create"money by lending out the deposits that exceed the fractional reserve. D) The fractional reserve banking system allows the entire banking system to increase the money supply by much more than the amount of an initial deposit.
A fractional reserve banking system requires that the full fraction (100%) of all deposits made at a bank be held safely in the form of cash or government securities in order to fulfill depositor's withdrawal demands.Which of the following correct defines and describes "fiat money?
Which of the following is NOT true? Question options: A) An expansionary gap is the amount by which actual output exceeds potential output in the short run. B) An expansionary gap creates inflationary pressure which causes the short-run aggregate supply curve to shift to the left enough to close the expansionary gap. C) Expansionary gaps are closed by upward pressure on the price level that in turn shifts the Aggregate Supply curve to the left, reducing REal GDP until it equals Potential Output. D) Actual output cannot exceed Potential Output in the short run but it is always greater than Potential Output in the long run.
Actual output cannot exceed Potential Output in the short run but it is always greater than Potential Output in the long run.
What type gap is shown by the amount by which actual output exceeds potential output in the short run? Question options: A) An expansionary gap refers to the gap in which actual output is greater than potential output in the short run. Over time it generates inflation which causes the short run aggregate supply curve to shift to the left enough to nearly eliminate the expansionary gap. B) A recessionary gap refers to the gap in which actual output is greater than potential output in the short run. Over time it generates inflation which causes the short run aggregate supply curve to shift to the left enough to nearly eliminate the expansionary gap. C) A consumption gap refers to the gap in which potential output is greater than true output in the short run. Over time it generates deflation which causes the short run aggregate supply curve to shift to the left enough to nearly eliminate the expansionary gap. D) A real gap refers occurs when true output is greater than real output in the lomng run. Over time it generates inflation which causes the long run aggregate demand curve to shift to the left enough to nearly eliminate the expansionary gap.
An expansionary gap refers to the gap in which actual output is greater than potential output in the short run. Over time it generates inflation which causes the short run aggregate supply curve to shift to the left enough to nearly eliminate the expansionary gap.
Which of the following correctly states the relationship between a change in the money supply and a change in prevailing interest rates? Question options: A) An increase in the money supply causes an increase in prevailing market interest rates, which leads to greater investment spending and a lower GDP. B) An decrease in the money supply causes an increase in prevailing market interest rates, which leads to greater investment spending. C) An increase in the money supply causes an increase in prevailing market interest rates. D) An increase in the money supply causes a decrease in prevailing market interest rates, which results in growth in GDP.
An increase in the money supply causes a decrease in prevailing market interest rates, which results in growth in GDP.
Which of the following is NOT true? Question options: A) Automatic stabilizers are automatic changes in government spending and tax collection that serve to smooth out fluctuations in the economy. B) Automatic stabilizers stimulate aggregate demand during recessions. C) Automatic stabilizers dampen aggregate demand during overheated expansions. D) Automatic stabilizers require rapid action by Congress to provide the correct application of changes in government spending and taxation.
Automatic stabilizers require rapid action by Congress to provide the correct application of changes in government spending and taxation.
Which of the following is NOT true about Excess Reserves? A) Excess reserves are the reason that banks can essentially "create" money by loaning such reserves out to borrowers. B) Excess reserves must be held by banks in the form of cash or credits at the Federal Reserve Banks. C) Deposits in banks in excess of the reserve requirement are known as excess reserves, which can be loaned out. D) Excess reserves help expand economic activity by the fact that they can be loaned out by the banks to be used by investors and consumers.
Excess reserves must be held by banks in the form of cash or credits at the Federal Reserve Banks.
If inflation is raging, what type of gap exists? Question options: A) Time gap. B) Output gap. C) Expansionary Gap. D) Recessionary Gap.
Expansionary Gap.
Which federal agency or institution has authority to manage the money supply? A) Senate Finance and Tax B) House Finance and Tax C) U.S. Department of Treasury D) Federal Reserve System
Federal Reserve System
Which of the following correct defines and describes "fiat money?" Question options: A) Fiat money is anything of value accepted in an economy as a medium of exchange. B) Fiat money must be backed by gold or silver in order for the government to decree that it to be legal tender. C) Fiat money is not backed by gold or silver but rather has value only because the government decrees it to be legal tender. D) Fiat money is legal tender backed by gold, silver or copper as was the custom in the earlier Italian money houses in Medieval times.
Fiat money is not backed by gold or silver but rather has value only because the government decrees it to be legal tender.
If a consumer spends 90 cents out of every additional dollar she earns, what does this 90% represent? Question options: A) Her marginal propensity to consume (MPC). B) Her alarming inclination to expand. C) Her marginal propiquity to save 100%. D) Her margins are propinquis.
Her marginal propensity to consume (MPC).
Which of the following correctly defines and states the Quantity Theory of Money? Question options: A) The Theory of Money states that the quantity of money held never exceeds the dollar value of nominal GDP. B) The Theory of Money Quantity holds that the quantity of money in an economy can never exceed the value of Real GDP, except in the last phase of a recession. C) If velocity is constant, the Quantity Theory of Money states that a 5% increase in the Money Supply will increase nominal GDP by 5%. D) The Quantity of Money asserts that the velocity of exchange is constant and therefore the quantity of money always equals GDP.
If velocity is constant, the Quantity Theory of Money states that a 5% increase in the Money Supply will increase nominal GDP by 5%.
Which of the following correctly states the long run impact of a change in the money supply? Question options: A) In the long run, an increase in the money supply results in greater GDP and lower prices. B) In the long run, an increase in the money supply results in a higher price level. C) In the long run, an increase in the money supply has no impact on the price level. D) In the long run, an increase in the money supply increases aggregate demand without increasing the money supply.
In the long run, an increase in the money supply results in a higher price level.
Under which scenario is the Real Wage most different from the Nominal Wage? Question options: A) Low Inflation B) Zero Inflation C) Inflation Rate of 1% D) Inflation Rate of 20%
Inflation Rate of 20%
In what way is money a unit of account and a store of value? Question options: A) It is used to account for debt obligations and is stored for future uses. B) It is a unit of account because it allows for dividing payments into smaller increments. It is a store of value in that it retains most, if not all, of its original value. C) It is something used to account for money and it is used in stores. D) It is pliable and usable.
It is a unit of account because it allows for dividing payments into smaller increments. It is a store of value in that it retains most, if not all, of its original value.
Which of the following is NOT a primary function of money? Question options: A) Money serves as a medium of exchange. B) Money serves as a store of value. C) Money is a unit of account. D) Money fulfills most of the major psychological needs of consumers, investors and firms.
Money fulfills most of the major psychological needs of consumers, investors and firms.
Which of the following is the best example of "fiat money?" Question options: A) Paper currency or cheap metal coins deemed as official tender by a government. B) Pure gold, silver and copper coins. C) Deposit backed debit cards and money market checking accounts. D) Bit coins and internet generated value accounts.
Paper currency or cheap metal coins deemed as official tender by a government.
Which of the following is NOT true? Question options: A) A recessionary gap is the amount by actual output in the short run falls short of potential output. B) Rising prices help close a recessionary gap. C) In the long run, in response to a recessionary gap, prices will fall, which shifts the Aggregate Supply curve to the right until Real GDP equals Potential GDP. D) Closing an expansionary gap involves inflation while closing a recessionary gap involves deflation (falling prices).
Rising prices help close a recessionary gap.
Which of the following correctly states the relationship between the actual price level and Real GDP supplied? Question options: A) The Aggregate Supply Curve shows that as the actual price level rises, real GDP supplied in the short run increases. B) The Aggregate Supply Curve shows that as the actual price level rises, real GDP supplied in the long run decreases. C) The Aggregate Supply Curve shows that as the actual price level rises, real GDP supplied in the short run does not change. But in the long run, an increase in the price level causes Real PDG to fall. D) The Aggregate Supply Curve shows an inverse relationship between the actual price level and Nominal GDP.
The Aggregate Supply Curve shows that as the actual price level rises, real GDP supplied in the short run increases.
In the Equation of Exchange, what factors illustrate Nominal GDP? Question options: A) The Equation of Exchange is M x V= P x Y, where M is the money supply, V is the velocity of money, P is the price level and Y is real output. Therefore, P x Y illustrate Nominal GDP. B) The Equation of Exchange is M x V= P x Y, where M is the money supply, V is the velocity of money, P is the price level and Y is real output. Therefore M x V illustrates Nominal GDP. C) Nominal GDP is not illustrated by any factors in the Equation of Exchange. D) M X V / P x Y= Nominal GDP.
The Equation of Exchange is M x V= P x Y, where M is the money supply, V is the velocity of money, P is the price level and Y is real output.
Which of the following provides the correct Equation of Exchange? Question options: A) The Equation of Exchange is 1/r, where r represents the interest rate. B) The Equation of Exchange is M x V= P x Y, where M is the money supply, V is the velocity of money, P is the price level and Y is real output. C) The Equation of Exchange is 1/r, where r represents the Reserve Requirement Ratio. D) The Equation of Exchange is M/V= P&Y, where M is the money supply, V is Investment, P is Population Growth and Y is Employment.
The Equation of Exchange is M x V= P x Y, where M is the money supply, V is the velocity of money, P is the price level and Y is real output.
What is the Velocity of Money? Question options: A) The Velocity of Money is the shortening of time between bond purchases by the FED. B) The Equation of Exchange is M x V= P x Y, where M is the money supply, V is the velocity of money, P is the price level and Y is real output. The velocity of money is how quickly a given dollar bill is reused to make purchases by different people in the economy. C) The Velocity of Money is how quickly bond purchases by the Fed result in lowering of the federal funds rate. D) The Velocity of Money is the elapse of time between a reduction in the discount rate and a reduction in commercial banking interest rates.
The Equation of Exchange is M x V= P x Y, where M is the money supply, V is the velocity of money, P is the price level and Y is real output. The velocity of money is how quickly a given dollar bill is reused to make purchases by different people in the economy.
Which of the following would have the largest effect on reducing the money supply and limiting economic growth? Question options: A) KMart going out of business. B) Wage rates falling 10%. C) The FED setting the reserve rate at 100%. D) Starbucks going bankrupt.
The FED setting the reserve rate at 100%.
Which of the following is NOT a method by which the Federal Reserve (Fed) expands or contracts the money supply? A) The Fed regulates the money supply through Open Market Operations. B) The Fed regulates the money supply through changes in the required reserve ratio. C) The Fed regulates the money supply through changes in the discount rate it charges to member banks. D) The Fed regulates the money supply through changes in requirements concerning fiat and commodity money.
The Fed regulates the money supply through changes in requirements concerning fiat and commodity money.
If the Fed fears that a recession has just begun or is about to unfold, what action is it likely to take? A) The Fed will raise the discount rate. B) The Fed will buy large amounts of government securities from banks and other financial institutions which will create a massive increase in excess reserves throughout the banking system. In response, the incidence of inter-bank loans will decrease, leading to a decrease in the federal funds rate. A lower federal funds rate leads to lower interest rates throughout the banking system. Lower interest rates boost borrowing by people and firms, which increases investment, jobs, incomes and output. C) The Fed will send a fax to each bank ordering them to raise the Federal Funds Rate. D) The Fed will increase the reserve requirement.
The Fed will buy large amounts of government securities from banks and other financial institutions which will create a massive increase in excess reserves throughout the banking system. In response, the incidence of inter-bank loans will decrease, leading to a decrease in the federal funds rate. A lower federal funds rate leads to lower interest rates throughout the banking system. Lower interest rates boost borrowing by people and firms, which increases investment, jobs, incomes and output.
Which of the following correctly describes how the Federal Funds Rate is set? A) The Federal Funds Rate is the rate charged by the Federal Reserve Bank to large loan applicants, such as major U.S. corporations and associations. B) The Federal Funds Rate is the rate charged by the Federal Reserve Bank to member banks who make loans from the Federal Reserve. C) The Federal Funds Rate is NOT set by the Fed but rather results from the rate banks charge each other for short term loans, usually overnight loans. D) The Federal Funds Rate is set by the President by pushing a button on the economy switchboard in the oval office.
The Federal Funds Rate is NOT set by the Fed but rather results from the rate banks charge each other for short term loans, usually overnight loans.
Which government body is tasked with regulating the money supply? Question options: A) Treasury Department B) Congress C) The Federal Reserve System D) Commerce Department
The Federal Reserve System
Which of the following correctly defines and describes the Federal Reserve? Question options: A) The Federal Reserve is the central bank of the U.S. and its functions are limited to paying federal employee wages, loaning funds to foreign governments and financing large scale military projects. B) The Federal Reserve is the U.S. most important national wildlife preserve. It covers 7 million acres and has 46 different types of snail darters. C) The Federal Reserve is the top bank of the U.S. and its functions are to make loans to low income citizens and newly formed small businesses. D) The Federal Reserve is the central bank of the U.S. and its functions are to issue bank notes, extend loans to member banks, to clear checks, and to force member banks to hold reserves at a rate set by the Fed.
The Federal Reserve is the central bank of the U.S. and its functions are to issue bank notes, extend loans to member banks, to clear checks, and to force member banks to hold reserves at a rate set by the Fed.
Which of the following statements is NOT true? A) The marginal propensity to consume (MPC) is shown as the percent of an increase in income that is devoted to consumption. If 90% of an increase in income goes to consumption, the MPC is 90%. B) The marginal propensity to consume is shown by the percent of an increase in income that is devoted to savings. C) The marginal propensity to consume can be found by subtracting the marginal propensity to save (MPS) from the increase in total income. D) The MPC is always less than the MPS.
The MPC is always less than the MPS.
Which of the following is NOT true about the Real Wage. Question options: A) While nominal wage is just the dollar amount printed on a paycheck, the real wage measures the wage in terms of constant dollars, which are dollars measured by the actual quantity of goods and services they buy. B) The Real Wage is the nominal wage adjusted for inflation. C) If inflation increases more than the Nominal Wage increases, the Real Wage falls. D) The Real Wage is the official wage paid to classified government employees.
The Real Wage is the official wage paid to classified government employees.
Which of the following is correct about the impact of the Simple Spending Multiplier on Real GDP? Question options: A) The Sample Money Multiplier is found by multiplying the difference between MPS and MPC by the change in new spending. (MPS-MPC) X Change in Spending =Simple Money Multiplier B) The Simple spending Multiplier is calculated as 1/MPS. (Or 1/1-MPC). Multiplying the Simple Spending Multiplier by a change in new spending in the economy shows the total effect on Real GDP. If MPS=.10, then the Simple Spending Multiplier is 10. Therefore, an increase in new investment spending of $10 billion will increase Real GDP by $100 billion. C) The Simple Multiplier is calculated as 100/MPS+MPC. Multiplying the Simple Multiplier by a change in new spending in the economy shows the total effect on Real GDP. If MPS=.50 and MPC=.50, then the Simple Multiplier is 50. Therefore, an increase in new investment spending of $10 billion will increase Real GDP by $20 billion. D) The Simple Money Multiplier is used only if nominal investment exceeds real consumption by a ratio that is equal to MPC and MPS.
The Simple spending Multiplier is calculated as 1/MPS. (Or 1/1-MPC). Multiplying the Simple Spending Multiplier by a change in new spending in the economy shows the total effect on Real GDP. If MPS=.10, then the Simple Spending Multiplier is 10. Therefore, an increase in new investment spending of $10 billion will increase Real GDP by $100 billion.
Which of the following correctly identifies the impact on the money supply when the Fed sells massive amounts of government securities? A) The money supply is unaffected. B) The money supply expands. C) The money supply contracts. D) During a recession, the money supply supply expands by an amount less than the value of the purchase.
The money supply contracts.
Which of the following correctly states the opportunity cost of holding money? Question options: A) The opportunity cost of holding money is the interest rate. B) The opportunity cost of holding money is the interest payments given up from not having that money in an interest paying instrument. C) The opportunity cost of holding money is the dollar value of intermediate and final goods and services that could be purchased with that money. D) There is no opportunity cost of holding money as long as the amount held represents less than 10% of the value of assets owned by the
The opportunity cost of holding money is the interest payments given up from not having that money in an interest paying instrument.
When actual output exceeds potential output what happens to the price level? Question options: A) The price level rises because employers have to raise wage rates to entice more people into the labor market and employers have to pay more for other inputs that become more expensive to produce. B) The price level falls because employers have to raise wage rates to entice more people into the labor market and employers have to pay more for other inputs that become more expensive to produce. C) The price level is unaffected. D) The price level falls as employers reduce wages.
The price level rises because employers have to raise wage rates to entice more people into the labor market and employers have to pay more for other inputs that become more expensive to produce.
Which of the following is correct about the Marginal Propensity to Save? Question options: A) The Marginal Propensity to Save is found by dividing the increase in saving by the increase in consumption. B) The Marginal Propensity to Save (MPS) is always greater than the MPC (Marginal Propensity to Consume). C) The proportion of an increase in income that is assigned to saving is called the Marginal Propensity to Save (MPS). If 5% of an increase in income is devoted to savings, the MPS is 5%. D) The Marginal Propensity to Save is calculated by multiplying the change in consumption by the percent change in savings.
The proportion of an increase in income that is assigned to saving is called the Marginal Propensity to Save (MPS). If 5% of an increase in income is devoted to savings, the MPS is 5%.
What is the relationship between the required reserve ratio and the simple money multiplier? A) The simple money multiplier is 1/r, where "r" is the required reserve ratio. If the required reserve ratio is 50%, the simple money multiplier is 2. If the required reserve ratio is 5%, the simple money multiplier is 20. The lower the reserve requirement, the greater the multiplier. B) The simple money multiplier is 100/r, where "r" is the required reserve ratio. If the required reserve ratio is 50%, the simple money multiplier is 200. If the required reserve ratio is 5%, the simple money multiplier is 20. The higher the reserve requirement, the greater the multiplier. C) The simple money multiplier is r x 100, where "r" is the required reserve ratio. If the required reserve ratio is 50%, the simple money multiplier is 50. If the required reserve ratio is 5%, the simple money multiplier is 200. The lower the reserve requirement, the lower the multiplier. D) There is no relationship between the reserve required ratio and the simple money multiplier.
The simple money multiplier is 1/r, where "r" is the required reserve ratio. If the required reserve ratio is 50%, the simple money multiplier is 2. If the required reserve ratio is 5%, the simple money multiplier is 20. The lower the reserve requirement, the greater the multiplier.
What is the correct sequence of effects when the FED buys large volumes of government bonds from banks and other financial institutions? A) When the FOMC buys government securities, it contracts the money supply which serves to increase excess reserves in banks, which increases the demand for interbanks loans, which then reduces the federal funds rate. A lower federal funds rate raises interest rates througout the banking system, which leads to more investment and jobs. B) When the FOMC buys government securities, it expands the money supply which serves to increase excess reserves in banks, which reduces the demand for interbanks loans, which then reduces the federal funds rate. A lower federal funds rate leads to lower interest rates throughout the commercial banking system. Lower interest rates lead to more borrowing by people and firms, which leads to more investment, more jobs and higher incomes. C) When the FED buys government securities, it expands the money supply which serves to decrease excess reserves in banks, which reduces the demand for interbanks loans, which then increases the federal funds rate, which leads to more investment, spending and output. D) When the FOMC buys government securities, it contracts the money supply which serves to increase excess reserves in banks, which reduces the demand for interbanks loans, which then increases the federal funds rate.
When the FOMC buys government securities, it expands the money supply which serves to increase excess reserves in banks, which reduces the demand for interbanks loans, which then reduces the federal funds rate. A lower federal funds rate leads to lower interest rates throughout the commercial banking system. Lower interest rates lead to more borrowing by people and firms, which leads to more investment, more jobs and higher incomes.
Which of the following correctly states the process by which a change in the money supply impacts GDP. Question options: A) When the money supply increases, the interest rate falls and investment and consumer spending increases, which leads to an increase in GDP. B) When the money supply decreases, the interest rate falls and investment spending increases, but GDP remains constant. C) When the money supply increases, the interest rate increases and investment spending decreases. D) There is actually no process by which a change in the money supply impacts GDP.
When the money supply increases, the interest rate falls and investment and consumer spending increases, which leads to an increase in GDP.
Which of the following correctly describes the long run impact of federal deficits? Question options: A) Deficits stimulate aggregate demand in in the long run but have no impact on boosting the economy in the short run. B) Deficits have no real impact on the long run economic picture. C) Deficits always increase national saving which can promote robust economic growth in the long run. D) While a deficit stimulates aggregate demand in the short run, it decreases national saving which can impede economic growth in the long run.
While a deficit stimulates aggregate demand in the short run, it decreases national saving which can impede economic growth in the long run.
Which of the following is NOT true? Question options: A) The Federal Reserve is the central bank of the U.S. and its functions are to issue bank notes, extend loans to member banks, to clear checks, and to force member banks to hold reserves at a rate set by the Fed. B) Reserves are funds the Fed requires banks to hold to meet the day to day demands of customers. Reserves consist of both cash at the member bank and funds held by the Fed. C) The interest rate charged on loans to member banks by Reserve banks in the Federal Reserve System is called the discount rate. D) All stock in reserve banks in the Federal Reserve System are owned by the Federal government and all profits accrue to the Treasury.
All stock in reserve banks in the Federal Reserve System are owned by the Federal government and all profits accrue to the Treasury.
Which method of exchange requires a coincidence of wants, which means that each party in an exchange must possess something that is valued and desired by the other party? Question options: A) Fiat Money B) Reserve C) Borrowing on time D) Barter
Barter
Which tool is most commonly used by the Fed to manipulate the money supply? A) Bond buying through the F.O.M.C. B) Changing the reserve requirement C) Changing the discount rate. D) Sending a fax to all member banks ordering them to change their interest rates.
Bond buying through the F.O.M.C.
If the Stock Market is booming and interest rates on government bonds is skyrocketing, what is likely to happen to the Quantity Demanded of Money? Question options: A) Increase B) Double or triple at least. C) Decrease. D) No change.
Decrease
What change in the interest rates charged by commercial banks will increase GDP? Question options: A) Doubling the interest rates charged by commercial banks. B) Tripling the interest rates charged by commercial banks. C) Holding interest rates steady. D) Decreasing interest rates charged by commercial banks.
Decreasing interest rates charged by commercial banks.
Which of the following is NOT true? Question options: A) The Simple Spending Multiplier is found by dividing one by MPS (Marginal Propensity to Save). 1/(1-MPC)=Simple Spending Multiplier. B) To find out the total increase in real GDP, just multiply the increase in new spending by the Simple Spending Multiplier. C) If MPC= 50%, then a $100 billion increase in Investment spending will increase total real GDP by $200 billion. D) Dividing Nominal GDP by the Sample Money Divider equals the average annual increase in real domestic spending.
Dividing Nominal GDP by the Sample Money Divider equals the average annual increase in real domestic spending.
What is the correct response and effect of Automatic Stabilizers during a Recession? Question options: A) During a robust Economic Contraction (Recession), automatic stabilizers increase government welfare spending and reduce tax revenues. B) During a Recession, automatic stabilizers decrease government welfare spending and increase personal and corporate tax revenues. C) During a Recession, automatic stabilizers decrease government welfare spending and decrease excise and non-personal taxes. D) During a Recession, automatic stabilizers ensure no changes in welfare spending or tax revenues.
During a robust Economic Contraction (Recession), automatic stabilizers increase government welfare spending and reduce tax revenues
