Test #4

When economists say that money serves as a medium of exchange, they mean that it is

a means of payment

When economists say that money serves as a unit of account, they mean that it is

a monetary unit for measuring and comparing the relative values of goods

When economists say that money serves as a store of value, they mean that it is

a way to keep wealth in a readily spendable form for future use

The largest proportion of the U.S. public debt is held by

the U.S. public (individuals, businesses, financial institutions, and government)

Fiscal policy refers to

deliberate changes in government spending and taxes to promote economic growth, full employment, and price level stability

The economy is in a recession. The government enacts a policy to increase spending by $6 billion. The MPS is 0.20. What would be the full increase in real GDP from the change in government spending, assuming that the aggregate supply curve is horizontal across the range of GDP being considered?

$30 billion (1/.2 = 5 --> 6 x 5 = 30)

The Board of Governors of the Federal Reserve has ____ members.

7

If the required reserve ratio were 15 percent, the value of the monetary multiplier would be

6.67

The Federal Reserve System consists of which of the following?

Board of Governors and the 12 Federal Reserve Banks

Which of the following is not true about the Federal Reserve Banks?

They compete with commercial banks in their basic functions

As it relates to Federal Reserve activities, the acronym FOMC describes the

Federal Open Market Committee

Which of the following is a fiscal policy prescription for ending a recession?

Increase government expenditures to let the multiplier work

Who is the current chair of the Federal Reserve?

Jerome Powell

Fiscal policy includes

an increase in government spending

Fiscal policy includes

an increase in taxes

Which of the following is not considered a legitimate concern of a large public debt?

bankruptcy of the federal government

The Federal Reserve System of the United States is the country's

central bank

The 12 Federal Reserve Banks can best be characterized as

central banks, bankers' banks, and quasi-public banks

A federal budget deficit exists when

federal government spending exceeds tax revenues in a given year

Which of the following relies on government taxes and spending to change macro outcomes?

fiscal policy

A federal budget deficit is financed by the

government issuance or sale of Treasury securities

Purchasing groceries using a debit card best exemplifies money serving as a

medium of exchange

The political business cycle refers to the possibility that

politicians will manipulate the economy to enhance their chances of being reelected

The Federal Reserve Banks are owned by the

private commercial banks within each district

The Federal Reserve System performs the following functions except

providing banking services to the general public

The Federal Open Market Committee (FOMC) is made up of

the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis

To say that the Federal Reserve Banks are quasi-public banks means that

they are privately owned but managed in the public interest

One timing problem in using fiscal policy to counter a recession is the "administrative lag" that occurs between the

time the need for the fiscal action is recognized and the time that the action is taken

A $70 price tag on a sweater in a department store window is an example of money functioning as a

unit of account

Stock market price quotations best exemplify money serving as a

unit of account

If people expected that a fiscal policy in the form of a tax cut was temporary, then this policy's effect on the economy would tend to be

weaker