i love econ (3)
When countries replaced gold and silver coins with paper money exchangeable for certain amounts of precious metals, the monetary system evolved from using _____ money to using _____ money.
commodity; commodity-backed
Among the liabilities of banks are:
customers' deposits
If the marginal propensity to consume is 0.75 and government purchases of goods and services decrease by $30 billion, real GDP will:
decrease by $120 billion
Loans of reserves from one bank to another are made in the _____ market
federal funds
When banks borrow from and lend reserves to each other, they are participating in the _____ market
federal funds
Money that the government has ordered to be accepted as money is:
fiat money
The U.S. dollar is an example of:
fiat money
The national debt:
grows when the government runs a deficit
An increase in the price of imported oil leads to a _____ shock
negative demand
Which of the following is (are) a tool(s) of monetary policy used by the Federal Reserve?
open market operations; not government purchases of goods and services
If it looks as if a bank won't meet the Federal Reserve Bank's reserve requirement, normally it will first turn to the:
other member banks and borrow money at the federal funds rate
The long-run level of output is known as _____ output
potential
The medium-of-exchange function means that money is used:
to pay for goods and services
In the short run, wages and some prices are considered to be:
sticky
If the marginal propensity to consume is 0.9, then the government spending multiplier is:
10
If the marginal propensity to save is 0.1, then the government spending multiplier has a value of
10
The primary difference between M1 and M2 is that:
M2 includes savings deposits and time deposits, but M1 does not
A leftward shift of the aggregate demand curve may have been the result of:
a decrease in investment spending following pessimistic GDP forecasts
Suppose the equilibrium aggregate price level is rising and the equilibrium level of real GDP is falling. Which of the following MOST likely caused these changes?
a decrease in short-run aggregate supply
An increase in government spending on health care is likely to shift the _____ curve to the _____
aggregate demand; right
Increasing the quantity of money in circulation shifts the _____ curve to the _____
aggregate demand; right
If the economy is at potential output and consumption spending suddenly decreases because of a fall in consumer confidence, the appropriate fiscal policy is:
an increase in government spending
Policy makers use a contractionary fiscal policy when they want to close:
an inflationary gap
If the economy is in a recessionary gap, actual output will be _____ potential output
below
When the government has a deficit, it will most likely finance the deficit by:
borrowing the money
In the long run, changes in the aggregate price level will be accompanied by _____ proportional changes in input prices
equal
The three consequences of the decline in demand during the Great Depression were _____ prices, _____ output, and a surge in unemployment.
falling; declining
The short-run aggregate supply curve is positively sloped because:
higher prices lead to higher profit and higher output
A leftward movement of the aggregate demand curve could be caused by:
higher tax rates
The short-run aggregate supply curve slopes upward because a _____ aggregate price level leads to _____
higher; higher output, since most production costs are fixed in the short run
Suppose the Federal Reserve were to buy $100 million of U.S. Treasury bills. The money supply would:
increase by more than $100 million
If the government spends an extra $5 billion on goods and services, GDP will:
increase by more than $5 billion
To _____ the money supply, the Federal Reserve could _____
increase; conduct open-market purchases
Expansionary fiscal policy:
increases aggregate demand
Assume that marginal propensity to consume is 0.8 and potential output is $800 billion. If the actual real GDP is $700 billion, _____ government spending by _____ would bring the economy to potential output
increasing; $20 billion
If the economy is at equilibrium above potential output, there is a(n) _____ gap, and _____ fiscal policy is appropriate
inflationary; contractionary
The short-run aggregate supply curve will shift to the:
left if nominal wages increase
If the Federal Reserve wants to increase the money supply, it could:
lower the reserve requirement
To decrease the money supply, the central bank could
make open-market sales
When the economy expands, income tax receipts will:
rise, and sales tax revenues will rise
The national debt _____ when the federal government incurs a _____
rises; deficit
A decrease in aggregate demand is seen as a(n) _____ the aggregate demand curve
shift to the left in
A general increase in wages will result primarily in the _____ curve shifting to the _____
short-run aggregate supply; left
Suppose a group of people decided to set up their own economic system with cartons of milk serving as money. If we decided to use this "liquid asset" as our medium of exchange and all prices were measured in cartons of milk, milk would still not be a good form of money mainly because it would not be a good:
store of value
A natural disaster that destroys part of a country's infrastructure is a type of negative _____ shock and therefore shifts the _____ curve to the _____
supply; short-run aggregate supply; left
"Tuition at State University this year is $8,000." Which function of money does this statement best illustrate?
unit of account