Macro Exam 4

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60) Largest source of federal government revenues

Individual income taxes

41) time policymakers must wait for economic data to be collected, processed, and reported

Information Lag

55) reward for saving is ____and this variable is placed on the ____axis of the loanable funds market graph

Interest Vertical

35) Price of a bond is equal to

Interest payment / yield

13) The demand curve for loanable funds represents ____ and ____

Investors; downward sloping

64) M2 is ____ in dollar value than M1; it also contains ___assets

Larger Less Liquid

30) Crowding out

Leads to higher interest rates

66) Rising productivity will increase economic growth and raise the average standard of living, shifting the ____ curve to the ____

Long-run aggregate supply; right

39) took $5000 from checking account and put money in savings account at same bank

MI went down by $5000 but M2 was unchanged

20) if reserve requirement is 1% what is the money multiplier

MM = 1/.01 = 100

48) Liquid scale

Most $100 in cash Least Picasso painting

22) Examples of discretionary spending

National defense income security veterans benefits

Decision Lag

Passed by congress

57) The ___is the sum of past ___

Public debt Budget deficits

68) time it takes for policymakers to confirm that the economy is trending in or out of a recession

Recognition Lag

53) Crowding effect can drive up interest rates, which ____ consumer spending on durable goods and ___ business investment

Reduces Reduces

17) Examples of contractionary fiscal policy

Reducing government spending Reducing transfer payments Raising taxes

25) Formula for reserve ratio

Reserves / total deposits

59) government spending increases, aggregate demand curve shifts to the ___ and the multiplier effect is dampened by a ___ in the aggregate price level

Right rise

8) Examples of mandatory spending

Social Security; interest on the national debt; Medicare

61) If Sparrow buries a chest of gold on a deserted island and plans to come back for it later, then the gold is functioning as a

Store of value

28) Government implements a policy reducing rewards earned by savers

Supply of lonable funds shifts left

54) Automatic Stabilizers include

Unemployment compensation benefits Welfare payments Tax revenues

5) Unemployment benefit programs are an example of discretionary fiscal policy

When workers lose their job file for unemployment benefits; so government spending rise during recessions; As economy recovers and people go back to work, spending on unemployment shrinks

4) Disposal income is equal to

Y - T Y = income T = Taxes

44) Laffer curve demonstrates

above some point on the tax rate scale, lowering tax rates increases tax revenues

26) Budget Deficit

amount by which annual government spending exceeds tax revenues

72) Money

anything that is accepted in exchange for other goods and services or for the payment of debt

24) Fed increases supply of money in the market

bond prices will rise interest rates will fal

43) Federal Open Market Committee

composed of the Board of Governors and five other regional Reserve Bank presidents

23) Mandatory spending

comprimises two-thirds of the federal budgest

Informational lag

data not available

38) Successful barter in a primitive economy necessitates

double coincidence of wants

10) leads to higher interest rates

end of a government program that provides taxpayers with additional incentives to invest in their retirement plan

3) Unit of Account

function of money that gives us a yardstick by which we can measure and compare the values of a wide variety of goods and services

33) Liquidity

how quickly, easily, and reliably an asset can be converted into a edium of exchange

Implementation lag

implement law

11) legislators debate for six months on which spending programs to utilize to manipulate the business cycle

implementation lag

7) economy is in recession; to increase demand using discretionary fiscal policy the government can

increase government spending or reduce taxes

42) Open market operations

involve the purchase and sale of government securities

40) Transfer payments

monies paid directly to individuals by the government

67) bank is subject to a reserve requirement of 15%, then it is required to

place 15% of its deposits in the account with its regional Federal Reserve bank or the vault

29) Federal Funds rate

rate at which banks charge each other for overnight

29) Discount Rate

rate at which regional Federal Reserve banks charge dipository institutions for short-term loans

45) expansionary policy pushes output beyond the full employment level of GDP

short-run aggregate supply curve will shift to the left

58) Increased government ___ leads to a larger increase in GDP when compared to the same reduction in

spending taxes

77) Federal Reserve system includes how many regional banks

12

19) if there is a general rise in fear of the financial system

Actual multiplier will rise

1) What are the primary functions of money?

unit of account, medium of exchange, store of value

Recognition Lag

wait until trend in data

56) MI includes

Cash Demand deposits other checkable deposits

6) Tool of Monetary Policy

Changing the discount rate changing reserve requirements open market operations

63) Contractionary fiscal policy is used to

Combat inflation stemming from an overheated economy

21) 12 Federal Reserve banks and their branches do this

Distribute coins and currency Regulate and supervise member banks Serve as a banker for the U.S. Treasury

36) Fiat money

Does not necessarily have any intrinsic value but has been declared by a government to be money

2) The best discretionary fiscal policy option is

Expansionary Fiscal policy that leads to full employment

70) Oversees main tool of monetary policy

Federal Open Market Committee

49) Central bank of the U.S

Federal Reserve System

73) basic goal of the Federal Reserve System

Full employment (maximize employment and minimize unemployment Maintain low and stable inflation

34) Corporate bonds generally have a ___ return on investment than do checking deposits because bonds are ___

Higher Riskier

12) The _____ lag can be expected to last 18 to 24 months

Implementation

47) time required to turn fiscal policy into law to have an impact on economy

Implementation


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