Macro Test 4

real interest rates rise, and investments falls

If Americans become less concerned with the future and save less at each real interest rate,

The supply of loanable funds to shift to the right and the real interest rate to fall

If Americans become more thrifty, we would expect

crowding out

If an increase in the budget deficit reduces national saving and investment, we have witnessed demonstration of

There is a budget deficit

If government spending exceeds tax collections,

The impact on the real interest rate is indeterminate

If the government increases investment tax credits and reduces taxes on the return to saving at the same time

Saving is unchanged

If the public consumes $100 Billion less and the government purchases $100 Billion more (other things unchanging); which of the following statements is true?

Reduction in budget deficit

If the supply of loanable funds is very inelastic (steep), which policy would likely increase saving and investment the most?

The purchase of capital equipment and structures

Investment is

Commodity Money

has intrinsic value based on the material from which it is made

Shifts the supply of loanable funds to the left.

An increase in the budget deficit that causes the government to increase its borrowing

Raise the real interest rate and decrease the quantity of loanable funds demanded for investment.

An increase in the budget deficit will

Borrowers and Lenders

A financial intermediary is a middle person between

Shifts the supply of loanable funds to the right and reduces the real interest rate.

An increase in the budget surplus

Probability to default

Credit rick refers to a bonds

Paper dollars

An example of Fiat money

A decrease in public saving

An increase in the budget deficit is

Private saving + public saving

National saving (or just saving) is equal to

open market operations(OMO's), lending banks, reserve requirements, and paying interest on reserves.

The Fed's tools of monetary control are

currency, demand deposits, traveler's checks, and other checkable accounts

The M1 money supply is composed of

The seven members appointed by the President and confirmed by the Senate who serve for one nonrenewable 14-year term.

The board of governors of the Federal Reserve system consists of,

The discount rate is

The interest rate on the loans that the Fed makes to banks

The Board of governors are appointed to 14 year terms.

To insulate the Federal Revserve from political pressure,

A bond issued by a star-up company

Which of the following financial market securities would likely pay the highest interest rate?

Stock

Which of the following is an example of equity finance?

protection against inflation

Which of the following is not a function of money

reducing reserve requirements

Which of the following policy actions by the Fed is used to increase the money supply?

buy government bonds, decrease reserve requirements, decrease the discount rate

Which of the following policy combinations would consistently work to increase the money supply

Lower taxes on the return to savings, provide investment tax credits, and lower the deficit.

Which of the following sets of government policies if the most growth-oriented?

Municipal bonds pay less interest than comparable corporate bonds

Which of the following statements is true?