Macro Final
If the MPC is 0.8, what change in government spending is required to reduce total income by 60 billion
12 billion
The Federal Reserve system is divided into
12 districts
If the MPC in an economy is 0.75 and aggregate expenditures increase by 5 billion the equilibrium GDP will increase by
20 billion
Assume that the marginal propensity to consume in an economy is 0.75. If the economy's full employment real GDP is 900 billion and its equilibrium real GDP is 800 billion there is a recessionary expenditure gap of
25 billion
If the required reserve ratio were 15 percent, the value of the monetary multiplier would be
6.67
If the reserve ration is 25 percent, what level of excess reserves does a bank acquire when a customer deposits a 12000 check drawn on another bank
9000
Which of the following statements is correct
An increase in exports will tend to increase, and an increase in imports will tend to decrease, the equilibrium GDP
A bank is in the position to make loans when required reserves
Are less than actual reserves
Which of the following is a monetary policy intended to rein in inflation
Decrease the money supply to shift the aggregate demand curve leftward
The interest rate that the Fed charges banks for loans to them is called
Discount Rate
The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation
Interest rates and wage rates have decreased
The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation?
Interest rates have increased
Which of the following Fed actions increases the excess reserves of commercial banks
Lower the reserve ratio
The following factors help explain the instability of investment, except...
Purchases of capital goods are usually nondiscretionary and cannot be postponed
Suppose the economy is at full employment with a high inflation rate. Which combination of policies is most likely to reduce the inflation rate
Sell government securities in the open market and decrease government spending
As the economy declines into a recession, the collection of personal income tax revenues automatically falls. This relationship best describes how the progressive income tax system...
Serves as an automatic stabilizer for the economy
Generally speaking, the greater the MPS, the..
Smaller would be the increase in income which results from an increase in consumption spending.
A television report stats: " The Federal Reserve will lower the discount rate for the fourth time this year." This report indicates that the Federal Reserve is most likely trying to
Stimulate the economy
Compared to fiscal policy, monetary policy has a much shorter
administrative lag
A fall in the prices of inputs will shift the aggregate
demand curve rightward
John Maynard Keynes developed the aggregate expenditures model in order to understand the
great depression
A decrease in expected returns on investment will most likely shift the AD curve to
the left because Ig will decrease
What function is money serving when you use it when you go shopping
a medium of exchange
The crowding-out effect suggest that
Increases in government spending may reduce private investment
Fiscal policy is enacted through changes in
taxation and government spending
The relationship between the MPS and the MPC is such that
1-MPC= MPS
WHich event would most likely decrease an economy's exports
An appreciation of a nation's currency relative to foreign currencies
When the Fed wants to lower the Federal funds rate it
buys bonds from banks and the public
Assume that the economy is in a recession and there is a budget deficit. A strict balanced budget amendment that would require the Federal government to balance its budget during a recession would be
contractionary and worsen the effects of the recession
When the Fed acts as a lender of last resort it is performing its role of
controlling the money supply
If personal income taxes and business taxes increase, then this will
decrease aggregate demand and aggregate supply
The amount of consumption in an economy correlates
directly with the level of disposable income
A federal budget deficit exists when
federal government spending exceeds tax revenues
An economy characterized by high unemployment is likely to be
in a recessionary expenditure gap
Dissaving occurs when
income is less than consumption
The crowding out effect suggests that
increases in government spending may reduce private investment.
AN increase in the money supply is likely to reduc
interest rates
An increase in the money supply is likely to reduce
interest rates
A decrease in expected returns on investment will most likely shift the AD curve to the
left because Ig will decrease
In a recessionary expenditure gap the equilibrium of real GDP is
less than full-employment GDP
A checkable deposit at a commercial bank is a
liability to the depositor and an asset to the bank
Menu costs will
make prices inflexible downward
If you know that an increase in a household's disposable income from 35000 to 45000 leads to in increase in consumption from 30000 to 38000 the you can conclude that the
marginal propensity to consume is .8
Which of the following would be considered to be the most liquid
money market mutual funds
The purchase and sale of government securities by the Fed is called
open market operations
Which one of the following is a tool of monetary policy for altering the reserves of commercial banks
open-market operations
The federal funds rate is the rate that banks pay for loans from
other banks
A lower real interest rate typically induces consumer to
purchase more goods that are bought using credit
Leakages from the spending multiplier process are
savings, taxes, and imports
In an economy, for every 10 million increase in disposable income, saving increases by 2 million. It can be concluded that the
slope of the consumption schedules is .8
One timing problem with fiscal policy to counter a recession is a "recognition lag" that occurs between the
start of the recession an the time it takes to recognize that the recession has started
Which of the following serves as an automatic stabilizer in the economy
the progressive income tax