Exam 3
Which of the following is not included in M1
$500 in your saving account
If the MPC is 0.8 what will be the change in GDP when there is a decrease f $100 in government spending?
A decrease of $500 in GDP
Which of the following is a fiscal policy tool?
All of the above
Which of the following may be a goal of fiscal policy?
All of the above
Which of the following would cause the supply of loanable funds curve to shift leftward?
An increase in the governments budget defecit
Suppose the government decided to lower net taxes by $100 billion to stimulate the economy. Given the MPC is .80, what will be the effect this policy change on GDP ?
An increase of $400 billion in GDP
For a given monetary policy, the crowding out effect refers to the fact that ________ in the governments budget deficit results in
An increase; higher interest rates and lower investment spending
Suppose the government has decided to intervene in the economy through expansionary fiscal policy. Which of the following fiscal policy actions would result in a larger deficit but smaller government sector relative to GDP?
Decreasing net taxes
Suppose MPC= .75 and the government has just decided to increase government spending and net taxes both by $25 billion and at the same time to maintain its budgetary balance. What will be the impact of this policy change in GDP?
GDP will increase by $25 billion
Liquidity refers to
How quickly and easily an asset can be converted into cash
Which of the following categories is an example of discretionary fiscal spending?
Hurricane relief funds
If the actual GDP is less than the potential GDP, the government should ______ to stimulate the economy
Increase spending
During a typical economic expansion, net taxes ________, the governments budget moves towards a ________ automatically, and thus the fiscal policy becomes __________
Increase, Surplus, Contractionary
The $787 billion stimulus package passed in the United States in 2009
Increased spending leads to a larger increase in GDP than the same reduction in taxes
Automatic Stabilizers include all of the following expect:
Increased spending on the military
The largest resource source in the U.s governments budget is ?
Individual income taxes
Which of the following is an example of contractionary fiscal policy?
Lowering government spending and lowering transfers
Which of the following is narrow money
M1
Karen decided to take $5,000 from her basic checking account and put the money in her saving account at the same bank
M1 fell by $5,000, but M2 was unchanged
Which of the following is correct?
M2>M1>Currency in circulation
Government spending that does not go through the annual appropriation process is called ________ spending
Mandatory
The difference between M1 and M2 is
Near Monies
In the US, discretionary fiscal policy comprises nearly _____ of the governments budget?
One-Third
In a barter economy
Products are exchanged for other products
Expansionary Fiscal policy is used to ?
Reduce unemployment caused by recessionary gap
Given that Sean's gross earning exceeds his consumption spending and tax payments, Sean is best described as a
Saver or as a supplier of funds
Regarding the role of the government in the economy, advocates of smaller government would most likely argue in favor of
Spending cuts when fiscal restraint is necessary
Which of the following is correct about the US dollar?
The US dollar is fiat money with no intrinsic value
Which of the following is a function of money with which people use money as a yardstick to post prices and record debts
Unit of Account
Which of the following is not included in M2
Your credit card balance
Which of the following is correct bout the government expenditure multiplier, tax multiplier, and the balance budget multiplier
mG>mT>mBB
Which of the following lists ranks types of assets from most liquid to least liquid?
Currency in circulation, Demand Deposits Accounts, Money Market Deposits Accounts
