Macro 3

Based on these production possibilities: Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If Alpha and Beta choose to trade at the rate of 1 Apple for 3 Oranges, then both Alpha and Beta will benefit.

True

When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following:

a contractionary monetary policy.

Which of the following events would cause interest rates to increase?

a higher discount rate

When one nation can produce a product at lower cost (or fewer resources) relative to another nation, it is said to have a(n) __________________ in producing that product.

absolute advantage

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:

aggregate demand curve will shift to the right.

The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.

an expansionary fiscal policy; an increase in government spending

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year.

budget deficit

A central bank that wants to increase the quantity of money in the economy will:

buy bonds in open market operations.

What term is used to describe the interest rate charged by the central bank when the central bank makes loans to commercial banks?

discount rate

The concept of _________________ means that as production increases, the long-run average total cost of production decreases.

economies of scale

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?

expansionary

Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________.

expansionary fiscal policy; lead to a budget deficit

According to international trade theory, a country should:

export goods in which it has a comparative advantage.

A recognition lag is the time that it takes for the money related to fiscal policy to be dispersed to the appropriate agencies to implement the stimulus program.

false

Reserve requirements are usually drastically changed while conducting monetary policy.

false

If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be?

fighting inflation

When banks hold excess reserves because they don't see good lending opportunities:

it negatively affects expansionary monetary policy.

The idea behind comparative advantage reflects the possibility that one party:

may be able to produce something at a lower opportunity cost than another party.

Which of the following is a traditional tool used by the Fed during recessions?

open market operations

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of __________________.

opportunity cost

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.

progressive tax

If South Dakota's governor reports a budget surplus in 2011, that state government likely:

received more in taxes than it spent in that year.

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?

reserve requirements

When the central bank decides it will sell bonds using open market operations:

the money supply decreases.

When the central bank lowers the reserve requirement on deposits:

the money supply increases and interest rates decrease.

National debt refers to the total amount that the government has borrowed over time.

true

The macroeconomic equation for the economy is M*V+P*Q

true

The most commonly used tool of monetary policy in the U.S. is open market operations.

true

The stimulus package of 2009 is an example of discretionary fiscal policy.

true

The velocity of circulation "V" is defined as the average number of times a dollar bill circulates in the economy per year.

true

When inflation begins to climb to unacceptable levels in the economy, the government should:

use contractionary fiscal policy to shift aggregate demand to the left.

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Beta

0.25 apples.

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha

0.5 apples

If GDP is 3600 and the money supply is 300, what is the velocity?

12

If nominal GDP is 1800 and the money supply is 450, then what is velocity?

4

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If Alpha & Beta choose to specialize in the products that they have comparative advantage in, then

Alpha should produce Apples

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.

Automatic stabilizers

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If Alpha & Beta choose to specialize in the products that they have comparative advantage in, then

Beta should produce Oranges

_________________________ is an innovative and nontraditional method used by the Federal Reserve to "expand the quantity of money and credit" during the recent U.S. recession.

Quantitative easing

Which of the following institutions oversees the safety and stability of the U.S. banking system?

The Federal Reserve