bonus quiz

Which of the following is consistent with the general consensus about the shape of the short-run aggregate supply curve

Horizontal, then upward-sloping, and ultimately vertical

Which of the following is an example of the multiplier at work as a result of an increase in consumption expenditures?

Households and businesses receive income from consumption expenditures; they spend a portion of this new income; these expenditures, in turn, generate income for other businesses and households, which in turn spend a portion of the new income, and so on.

One of the essential functions a bank performs is that of

Transferring money from savers to borrowers.

Which of the following generates a demand for dollars in the foreign exchange market?

Travel by foreign visitors in the United States.

According to supply-side theorists, a decrease in marginal tax rates will provide the incentive to

Produce more.

Trade restrictions

Reduce the gains from trade for the country as a whole.

Which of the following is the market where reserves can be borrowed by one bank from another bank for very short periods of time?

fed funds market

The use of government taxes and spending to alter macroeconomic outcomes is known as

fiscal policy

a tax cut intended to increase aggregate demand is an example of

fiscal stimulus

Which of the following explains why the government should not increase spending by the entire amount of the AD shortfall to move the economy to full employment?

The multiplier process will contribute to an additional increase in aggregate demand that will cause an inflationary gap.

If the banking system has a required reserve ratio of 25 percent, the money multiplier is

4

The Fed can decrease the federal funds rate by

Buying government bonds, which causes market interest rates to fall

In making monetary policy the Fed currently

Focuses on the federal funds rate

The United States has an absolute advantage in producing T-shirts, but not a comparative advantage, because

Other countries, such as China, can produce T-shirts at a lower opportunity cost relative to the United States

When exchange rates are flexible, they are

Permitted to vary with changes in supply and demand in the foreign exchange market.