Econ 202 Exam #3
Which of the following is a correct sequence of events during an expansion?
Unemployment falls, income rises, tax revenue rises, unemployment benefits fall, and the budget deficit falls
Gerald wants to take out an insurance policy on his Pez dispenser collection, and reports to his insurance company the the collection is worth $25,000. This is an example of using money as a
Unit of Account
When the manager of a department store attaches price to his/her products, he/she is using money as a
Unit of account
Any transaction that involves exchanging one good for another without using money is considered a
barter transaction
Checking account balances are included in
both M1 and M2
In 2016, the city of Canfield collected $500,000 intakes and spent $450,000. In 2016, the city of Canfield had a
budget surplus of $50,000
The U.S. dollar is an example of fiat money because
by law, it is decreed as money
Which of the following is not a form of commodity money?
checks
After World War II, cigarettes were used as money in Germany. This is an example of
commodity money
Assume that in the country of Salmon, the government triple the money supply overnight. As a result of this action, the price of a loaf of bread increased from 1 bill to 100 bills. This is an example of
currency debasement
If the government spending multiplier is 5 and government spending decreases by $200 billion, the output will ______ by $_______ billion
decrease; 1,000
As commercial banks keep more excess reserves, more creation
decreases
Included in M2 are
demand deposits
At equilibrium, injections
equal leakages
The total amount owed by the federal government to the public is the
federal debt
Money that has no intrinsic value and is created by a government decree is called
fiat money
(Y = C + I + G) when _______ in the income -expenditure model
government is included
Traveler's checks are
included in M1 and M2
During a recession, automatic stabilizers cause the federal deficit to
increase
Ruby transfers $700 from her saving account to her checking account. This transaction will
increase M1 and not change M2
Sarafina withdraws $450 from her saving account and places the money in her wallet. This transaction will
increase M1 and not change M2
Money
is anything that is regularly used and generally accepted in economic transactions or exchanges
When a government runs a deficit
its debt increases
Personal taxes are the______ in the government's budget
largest revenue source
Money that a government has required to be accepted in settlement of debts is
legal tender
Commercial banks create money through
making loans
Because money eliminates the "double coincidence of wants" problem, the development of money as a _______
medium of exchange
When you pay $8 for salad you ordererfor lunch, you are using money as a(n)
medium of exchange
The development of money as a medium of exchange has facilitated the expansion of trade because
money eliminates the "double coincidence of wants" problem
Which of the following would not be counted as part of M1?
money market accounts
Which of the following would not be included in M1?
money market accounts
The multiple by which total deposits can increase for every dollar in reserves is the
money multiplier
Close substitutes for transactions money are known as
near monies
A barter transaction involves exchanging
one good for another good
What is the largest source of revenue in the government's budget?
personal taxes
During an economic expansion, income ______, unemployment benefits _______, and the budget deficit ______.
rises, falls, falls
During a recession, unemployment______, Tax revenue ________, and the budget deficit ________.
rises, falls, rises
Which of the following is included in M2, but not included in M1?
saving account
A decrease in lump-sum taxes will
shift the consumption function upward
Aster won $500 on a slot machine. She deposits her $5,000 winnings into a money market fund so that she can use that money next year to help her pay for her new boat. This is an example of money serving as a(n)
store of value
Betty won $500 in a poker tournament. She deposits her $500 winnings into a money market fund so that she can use that money next year to help her pay for a trip to Las Vegas. This is an example of money serving as a(n)
store of value
Veronica received a federal income tax refund of $600 in May 2016. Veronica put this money in a saving account so that she could spend it when she went on vacation in July 2016. This is an example of money serving as a(n)
store of value
If the economy's full-employment output is $9 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a
structural deficit
The difference between what a government spends and what it collects in taxes in a year is
the government budget deficit or surplus
The government purchases multiplier is
the ratio of the change in the equilibrium level of output to a change in government purchases
The tax multiplier is
the ratio of the change in the equilibrium level of output to the changes in taxes
Fiscal policy refers to
the spending and taxing policies used by the government to influence the economy.
The main disadvantage of using money as a store of value is that
the value of money actually falls when the prices of goods and services rise
Currency debasement occurs when
the value of money falls as a result of a rapid increase in its supply
Which of the following is considered a liability to a bank
time deposits
A currency that is not backed up by gold, silver, or any other parties commodity equal to the face value of the money is known as
token money
the federal debt is the
total amount owed to the public by the federal government
The aggregate consumption function is C = 200 + .9Yd. If income is $1,500 and net taxes are $300, consumption equals
$1280
Suppose the required reserve ratio is 20%. A $40 million cash deposit will, at most, allow an expansion of the money supply to
$200 million
If the government spending multiplier is 2 and government purchases increase by $200 billion, output will increase by
$400 billion
If the MPC is .5 the tax multiplier is
-1
The required reserve ratio is 50%. The money multiplier is
2
the required reserve ratio is 5%. The money multiplier is
20
If the MPC is . 75, the government spending multiplier is
4
The aggregate consumption function is C = 100 + .6Yd. If income is $1,000 and net taxes are $300, consumption equals
520
Which of the following would not be included in M2?
Treasury bonds
For the economy to be in equilibrium, the following condition must be satisfied: G + I = S + T
True
The M2 definition of money includes traveler's checks
True
The government budget is balanced when tax receipts equal government spending
True
Jacob makes excellent tamales and Amanda is very good at mowing lawns. Amanda agrees to mow Jacob's lawn, if he makes her a dozen tamales. This is an example of
Barter
After government is added to the income - expenditure model, the formula for the aggregate expenditure consumption function is
C = a + b(Y - T)
If the economy's full-employment output is $6 trillion, actual output is $3.5 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a
Cyclical deficit
(currency held outside banks + demand deposits + other checkable deposits + travelers checks + savings account + money accounts + other near monies)
M2
An equation for M1 is
M2 - Saving Accounts - Money Market Accounts - Other Near Monies
The main advantage of using M2 instead of M1 as the measure for money is that
M2 is sometimes more stable
Disposable income
Decreases when income decreases
The economy is in equilibrium when aggregate output equals consumption spending.
False
The central bank of the United States is known as the
Federal reserve system
Assuming there is no foreign trade in the economy, the economy is in equilibrium when
I + G = S + T
Which of the following factors causes the barter system to be inefficient?
It requires a double coincidence of wants
Currency held outside banks + demand deposits + travelers checks + other checkable deposits=
M1
When the government sector is included in the income - expenditure model, the equation for aggregate income is
Y = C + I + G
The liquidity property of money is the property that makes money
a good medium of exchange and a good store of value
Which of the following is not a category of fiscal policy? a) government policies regarding money supply in the economy b) government policies regarding taxation c) government policies regarding the transfer payments and welfare benefits d) government policies regarding the purchase of goods and services
a) government policies regarding money supply in the economy
Money is
anything that is generally accepted as a medium of exchange
Things that a firm owns that are worth something are classified as
assets