Macro Econ

PS4 #2 Image Beginning at point A in the diagram, can you say what is the short-run grown rate in this economy after a + money shock? 1.2%, 6%, 2%, 3%

3%

Suppose you deposit $1,000 in your checking account. If the reserve ratio is 10%, how much of your deposit can the bank loan? 100, 900, 0, 1000

900

How can the Fed offset a positive shock to aggregate demand? -decrease the growth rate of the money supply -increase the growth rate of the money supply -increase the growth rate of gov spending -decrease the growth rate of gov spending

decrease the growth rate of the money supply

Other things being equal, a decrease in gov spending growth causes: -the Solow growth curve to shift to the right the dynamic AD curve to shift to the right -the dynamic AD curve to shift to the left -the Solow growth curve to shift to the left

the dynamic AD curve to shift to the left

What part of the money pyramid does the Fed have direct control over? -the monetary base -M2 -M1 -the monetary base plus

the monetary base

the Fed has the most control over: -M1 -the monetary base -M2 -money market mutual funds

the monetary base

In a recession, automatic stabilizers cause: -an increase in both tax revenues and government spending -a decrease in both tax revenues and gov spending -an increase in tax revenues and a decrease in government spending -a decrease in tax revenues and increase in gov spending

-a decrease in tax revenues and increase in gov spending

wages are sticky when: a. they are set according to inflation expectations that end up differing from actual inflation rates. b. All of the answers are correct. c. labor unions have set wages for a certain period of time. d. they are not changed as often as prices.

-labor unions have set wages for a certain period of time -they are not changed as often as prices -they are set according to inflation expectations that end up differing from actual inflation rates aka all 3

an open market operation occurs when: -the Fed buys or sells bonds -the Fed enforces regulations on the banking industry -banks increase the reserve ratio -banks load funds to each other

-the Fed buys or sells bonds

an increase in money growth will cause output growth to increase: -both the short and long -the short run only

-the short run only

Examples of automatic stabilizers include: I. food stamps. II. unemployment benefits. III. implementation lags.

1 and 2 only

The Solow growth curve is represented by a vertical line at the Solow growth rate because: I. it does not depend on the rate of inflation. II. there is an underlying assumption of strong money neutrality. III. it does not depend on the stock of factors of production.

1 and 2 only

Which of the following causes a shift of the dynamic AD curve to the left? I. increased taxes II. increased consumer confidence III. increased import growth

1 and 3 only

If spending growth is 3% and real GDP growth is 2%, what is the inflation rate? 1, 3, 2, 5

1%

Bank A has $100 million in deposits, $15 million in required reserves, and $85 million in loans. Bank A's reserve ratio is: 20, 75, 10, 15

15%

ps4 question 19 image: refer to the image, what is the long - run growth rate in this economy after a pos money shock? 4, 3, 6, 2

2%

if the required reserve ratio is 4%, the money multiplier is : 16, 4, 25, 20

25

ps4: question 23 image according to the dynamic aggregate dynamic model, the solow growth rate is: 3, 12, 4, 8

4%

ps4: prob 17 image point A on this dynamic demand curve represents a real GDP growth rate of:

5%

PSP 4: question 12 image From point X in the accompanying dynamic aggregate demand model, a negative supply shock that still lets the economy grow will change the inflation rate to: 10, 7, 3, 5

7%

Which of the following would be an example of running monetary policy by rules? -A 5% increase in money supply automatically leads to a 2% increase in real GDP. -An increase in money supply automatically leads to an increase in inflation. -The Fed will increase money growth to different levels, depending on the severity of the recession. -A 1% drop in real GDP will automatically elicit a 2% increase in money supply.

A 1% drop in real GDP will automatically elicit a 2% increase in money supply.

imagine that a gov starts out with a budget surplus. if in the next period the government temporarily runs a budget deficit, what would you expect to happen to aggregate demand? -AD would increase -AD would decrease -AD would lie on the Solow growth rate -AD would stay the same

AD would increase

When the U.S. Treasury borrows, the borrowing is managed by the: -Federal Reserve -Treasury -Senate Banking Committee Controller of Currency

Fed Reserve

How do conservative politicians who want smaller government impact the economy's expenditures? -It is a decrease in government expenditures -it is an increase in taxes -it is a decrease in consumer expenditures -it is an increase in a government expenditures

It is a decrease in government expenditures

The Fed Reserve can influence the economy by shifting:

The AD curve

PS5 #36 Suppose that the original real growth rate of the economy is 3% and that a negative aggregate demand shock causes a shift of the AD curve from AD 1 to AD 2. As a result of the Fed's policy response, the AD curve in the short run shifts to AD 5. Which of the following is TRUE about the Fed's policy response? The Fed responded too little to the shock. The Fed responded too much to the shock. The Fed provided just the right amount of response to the shock. The Fed was too fast in responding to the shock.

The Fed responded to too much shock

ps4 prob 36 image: from point x in the dynamic aggregate demand model, an increase in the supply of oil will cause the economy to move to point: W, X, Y, Z

W

A pos. real shock causes a shift of the: a.Solow growth curve to the right. b. aggregate demand curve to the left. c. aggregate demand curve to the right. d. Solow growth curve to the left.

a Solow growth curve to the right

Using the dynamic AD-AS model, if a country decreases government expenditures there would be: -a decrease in the aggregate demand. -an increase in the aggregate demand. -increase in Solow Growth -decrease in Solow Growth curve

a decrease in the aggregate demand.

AD-AS model, if a country decreases government expenditures there would be: -a decrease in the real GDP growth rates and a decrease in inflation -a decrease in real GDP growth rates and an increase in inflation -an increase in real GDP growth rates and an increase in inflation. -an increase in real GDP growth rates and a decrease in inflation.

a decrease in the real GDP growth rates and a decrease in inflation

If the Fed sets a target rate of inflation below 4%, it is an example of the Fed using: -the bully pulpit -discretion -a monetary policy rule -unofficial influence

a monetary policy rule.

A hurricane that damages buildings and roadways along the Gulf Coast is considered a: -pos shock -neg shock -pos transmission mechanism -neg transmission mechanism

a negative shock to the economy

A decrease in oil prices is an example of: a. a negative productivity shock. b. a positive productivity shock. c. a deflationary productivity shock. d. a neutral productivity shock.

a pos. productivity shock

a major hurricane hitting the east coast is an example of a: -real shock -productivity neutralizing event -GDP deflator -geographic distress

a real shock

Suppose both the growth rate of the money supply is fixed, then an increase in the growth rate of exports will cause: a.a shift of the dynamic AD curve to the left.b.an upward movement along the dynamic ADcurve.c.a shift of the dynamic AD curve to the right.d.a downward movement along the dynamic ADcurve.

a shift of the dynamic AD curve to the right

Which of the following are examples of negative shocks to the economy? new technology tax cuts terrorist attacks decreases in oil prices

a terrorist attacks

Expansionary fiscal policy today might mean: -increase taxes in the future -contractionary fiscal policy in the future -increased public borrowing in the future -all the answers are correct

all the answers are correct

Insolvement banks: -have liabilities that are greater than their assets -have on some occasions been recapitalized by the Treasury -all the answers are correct -have loan values that are too low compared to what they owe to their depositors

all the answers are correct

why does so much US currency circulate in other countries? -the US dollar is frequently used in drug trafficking -all 3 -dollars hold their value in unstable countries -several countries use the US dollar as their official currency

all the answers are correct

If wages are not as flexible as prices, an increase in money growth will lead to: - an increase in inflation and in firms profits -an increase in inflation but no rise in real short-run GDP growth -an increase in inflation and a rise in real long-run GDP growth -no change in inflation, but a fall in firms' profits

an increase in inflation and in firms' profit

when the FED buys US gov bonds to affect the money supply, it is conducting: -an open market purchase -an open market sale -discount rate lending -discount rate borrowing

an open market purchase

Money is best defined as: -the total amount of fixed assets we own -anything that is a widely accepted means of payment -only the amount we spend in a given period -anything that has a high nominal value

anything that is a widely accepted means of payment

The lags associated with monetary policy make its implementation of monetary policy more difficult during: -recessions only. -contractions only. -both expansions and contractions. -None of the answers are correct.

both expansions and contractions.

an increase in money growth will cause inflation to increase in: -both the short run and the long run -neither short or long -the long run only -the short run only

both the short run and the long run

To increase the money supply, the Fed would: -carry out the open market purchases and/or raise the reserve ratio -increase the discount rate, and/or lower the reserve ratio -carry out open market purchases and/or lower the discount rate -carry out open market sales and/or lower the discount rate

carry out open market purchases and/or lower the discount rate

which of these would help a government fight a recession? -cutting spending -paying down the national debt -cutting taxes -raising taxes

cutting taxes

When a negative shock to aggregate demand occurs, the inflation rate will: -remain the same -increase -decrease -be adjusted by the Fed

decrease

when a neg shock to aggregate demand occurs, the inflation rate will: -remain the same -increase -decrease -be adjusted by the Fed

decrease

ps4: question 21 image which of the following choices can explain the shift of the solow growth curve from a to b in the figure? war, oil crisis, devlopment of new tech, neg supply shock

development of new technology

the federal reserve is: federal government's bank, central bank, and banker's bank in the United States, all 3

federal government's bank, central bank, and banker's bank in the United States. aka all 3

PS5 #35 Assume that the economy is initially at point Y. In the best case scenario, the Fed will: -increase money supply to take the economy to point X. -decrease money supply to take the economy to point W. -increase money supply to take the economy to point W. -decrease money supply to take the economy to point X.

increase money supply to take to the economy to point X

PS5 #5 image suppose the economy is initially at point A. if an increase in investment spending causes a shift of the AD curve from AD1 to AD4 then the gov can avoid a short run increase in inflation by: -increasing taxes so that the AD curve shifts back to AD1 -increasing taxes so that the AD curve shifts further out to AD5. -increasing government spending so that the AD curve shifts back to AD1. -increasing government spending so that the AD curve shirts further out to AD5.

increasing taxes so that the AD curve shifts back to AD1

Holding reserves is costly for banks because: -the fed charges banks interest on required reserves -it leads to risk of robberies -it leads to fewer profits -it forces banks to pay for ATM machines

it leads to fewer profits

the implementation lag is likely to be: -shorter for changes in gov spending for changes in taxation -longer for changes in gov spending than for changes in taxation -indefinitely long for both changes in government spending and changes in taxation -similar in length for both changes in government spending and changes in taxation

longer for changes in gov spending than for changes in taxation

PS5 #37 Suppose that the original real growth rate of the economy is 3% and that a positive aggregate demand shock causes a shift of the AD curve from AD 1 to AD 4. The correct monetary policy response is to:

lower money supply growth, so that the AD curve shifts back to AD1.

in the Keynesian model, changes in the growth rate of C, I, G and NX tend to be changes in: -price levels -money supply -money velocity -all 3

money velocity

the relationship between bond prices and interest rates is: -negative -sometimes positive and sometimes negative -positive -neither pos or neg

negative

The Solow growth rate is the rate of economic growth that occurs when: -inflation is moderate -prices and wages are sticky -prices and wages are flexible -the money supply is growing

prices and wages are flexible

Which of the following is not a function of the Fed Reserve? -providing loans to small business -serving as the lender of last resort -regulating the US money supply -regulating the US financial system

providing loans to small business

Using the AD-Solow growth curve model, the internet revolution of the 1990s caused: -both real growth and inflation to decrease -real growth to decrease and inflation to increase -both real growth and inflation to increase -real growth to increase and inflation to decrease

real growth to increase and inflation to decrease

a decrease in consumption growth will cause the SOlow growth curve to: -shift outward -first shift outward and then shift inward -remain unchanged -shift inward

remain unchanged

when the Fed Reserve buys bonds, the demand curve for bonds: -sometimes shifts inward and sometimes shifts outward -shifts inward -shifts outward -does not shift

shifts outward

rapid changes in economic conditions that have large effects on the productivity of capital and labor are called: shocks, business cycles, transmission mechanisms, recessions

shocks

in the dynamic AD-AS model, an increase will cause the growth rate of GDP to increase in: -both short and long -the short only -neither -the long run only

short only

wages do not respond quickly to changes in the inflation rate are: -decreasing wages -real wages -sticky wages -flexible wages

sticky wages

-PS5 #18 image: Assume that the economy is initially at point Y. If the Fed takes the appropriate action with monetary policy, but banks are slow to lend: -the Fed action would be partially effective and the economy would move to point Z. -the Fed action would be magnified and the economy would move to point X. -the Fed action would be nullified and the economy would remain at point Y. -the Solow growth curve would shift to the left

the Fed action would be partially effective and the economy would move to point Z.

the financial crisis of 2008 illustrates that: -systemic risk is no longer a serious concern for the U.S. economy. -the Fed does not concern itself with the actions of investment banks. -the Fed has the power to control the President's responses to a financial and economic crisis and supervise fiscal policy. -the Fed has the power to step outside its normal functions and lend to investment banks as well as traditional commercial banks if it perceives the risk of financial contagion.

the Fed has the power to step outside its normal functions and lend to investment banks as well as traditional commercial banks if it perceives the risk of financial contagion.

PS5 #19 image: Assume that the economy is initially at point Y. If the Fed takes the appropriate action with monetary policy, but overestimates how serious the recession is: -the Fed would overshoot and the economy would move to point W -the Solow growth curve would shift to the left. -the Fed would take the economy to point X. -the Fed would fail to stimulate the economy and it would remain at point Y

the Fed would overshoot and the economy would move to point W

ps4 prob 40 image: referring to these SRAS curves, which of the following is TRUE of point a? -the actual inflation rate is 5% and the expected inflation rate is 3% -the actual inflation and the expected inflation rate are both 5% -the actual inflation rate is 3% and expected inflation rate is 5% -the actual inflation rate and the expected inflation rate are both 3%

the actual inflation rate and expected inflation rate are both 5%

who is jermone Powell?

the chair of the Fed Reserve

Suppose the economy is growing at the Solow growth rate of 3% and the inflation rate is 4%. Suppose a positive aggregate demand shock occurs and the Fed responds to the shock by decreasing the money supply. If the Fed's response fails to offset the aggregate demand shock, then in the short run: -the real growth rate will be higher than 3% and the inflation rate will be lower than 4%. -the real growth rate will be 3% and the inflation rate will be 4%. -the real growth rate will be higher than 3% and the inflation rate will be higher than 4%.

the real growth rate will be higher than 3% and the inflation rate will be higher than 4%.

In the dynamic AD-AS model, an increase in money growth will cause the growth rate of real GDP to increase in: -both short & long run -the short run -long run -neither

the short run only

an increase in money growth will cause output growth to increase in: -both the short and long run -neither -long run only -neither -short run only

the short run only

Fiscal policy can best be defined as: -the use of international political relations to influence the business cycle -the manipulation of the money supply to influence the business cycle -the use of gov expenditure and taxation to mitigate recessions only -the use of gov expenditure, gov borrowing and taxation to influence the business cycle

the use of gov expenditure, gov borrowing and taxation to influence the business cycle

when consumers cut back on spending what falls? -tax rates -interest rates -the money supply -the velocity of money

the velocity of money

When hit with a real negative economic shock, the Fed must make its policy choice between: -too high of a growth rate and too low wages. -too low of a growth rate and too high of an inflation rate -too high of a growth rate and too low of a savings rate -too low of a growth rate and too high of an unemployment rate.

too low of a growth rate and too high of an inflation rate

to be considered money, an asset must be: -all the answers are correct -currency -backed by gold or other precious metals -widely accepted as means of payment

widely accepted as means of payment