Econ Final 2018

Based on the table, the marginal propensity to consume is _______ and the average propensity to consume _______.

0.5; varies with the level of income

If disposable income is $250 and saving is $50, how much is the average propensity to consume?

0.80

What are the two common measures of the money supply is use today?

M1 and M2

A depression economy has considerable slack, therefore

unemployment is high

Social Security and Medicare are considered ________ liabilities and are expected to ________ over the next generation.

unfunded; rise

If AD shifts right as the economy booms, and then SRAS shifts left, what happens to inflation?

It increases

In a depressed economy with a MPC of 0.75, what effect will a $100 increase in government spenidng have on equilibrium GDP?

It will raise by $400

If the marginal propensity to save is 0.2 and income rises by $5,000, how much of this $5,000 will be consumed?

$4,000

There are _______ Regional Federal Reserve Banks; the only Regional Bank president who is a permanent member of the Federal Open Market Committee is based in _______.

12; New York

If a bank has a total of $80,000 in deposits and has made three loans in the amounts of $10,000, $20,000, and $30,000, what is this bank's reserve ration (assuming it has no other deposits or made any other loans)?

25%

If the money multiplier is 4, what is the reserve requirement?

25%

Which of the following statements do economists generally disagree on?

At an average tax rate of 50% tax revenues are maximised for a government.

How is money created "out of thin air" by banks?

Banks loan out money that is then redeposited into other banks, creating a cycle.

Which of the following would most likely cause aggregate demand to decrease?

Income taxes rise to reduce the deficit

Which statement is NOT true about Social Security?

Payroll taxes for Social Security are a percentage of income, with no income limit.

If the economy is above long-run equilibrium output, what will happen in the long run if the SRAS adjusts?

Prices rise and output decreases

Which type of IRA uses after-tax money contributions, but has no tax upon withdrawal?

Roth IRA

If mergers between firms increase throughout the economy, what would happen to the SRAS curve?

SRAS shifts left

Which of the following is a critical dilemma when implementing fiscal policy in reference to timing lags?

The economy may already be in a recovery before fiscal policy is enacted.

Which of the following sis classical economists believer would happen if the economy experienced a downturn?

The economy would self-correct

What does the 45-degree line in the Aggregate Expenditures model represent?

all consumption and no saving

What does the "paradox of thrift" say?

an economy that save too much can end up with lower total savings

The Federal Reserve uses its tools to counteract:

booms and recessions

If the unemployment rate is 10% and the inflation rate is 2%, the Federal Reserve will most likely:

buy bonds

A type of money made from a substance that is also valuable is called:

commodity money

What is the one major category that separates national debt from public debt?

debt held by other government agencies

If a government collects $550 billion in taxes and spends $700 billion, it would have a:

deficit of $150 billion

The twin goals of monetary policy are:

economic growth and stable prices

In the Keynesian model, the principal determinant of saving is:

income

If real GDP at full employment is $5 billion while current GDP is $6 billion, a(n) ______ exists, and will require a _____ in spending to bring the economy back to full employment.

inflationary gap; decrease

The dramatic collapse in the price technology stocks in 2001-2003, coupled with a short recession in 2001, caused the Federal Reserve to ______ interest rates to stimulate _________.

lower; employment

With the power of compounding, a $500 deposit in a savings account that earns 3% interest per year will earn how much in total interest after 10 years?

more than 30%

A bond's price and yield:

move in opposite directions

All of the following programs are considered mandatory spending EXCEPT:

national defense

In the market for loanable funds, savers are shown:

on an upward-sloping supply curve

What is the most important function of the Federal Reserve?

open market operations

The federal funds rate is the interest rate that banks charge other banks for ______ loans.

overnight

If the economy is facing inflationary pressures, the Federal Reserve will:

raise interest rates

In order for the Federal Reserve to raise interest rates, it needs to:

reduce the money supply

If the government offers an incentive for individuals to save, the supply for loanable funds will shift to the ______ and the real interest rate will ______

right; decrease

According to the trade-off between risk and return, which asset would likely have the highest average return on investment over a 20-year period?

shares of stock in social media companies

In the Keynesian aggregate expenditure model, which variable is assumed to be fixed?

the price level

The "wealth effect" refers to the fact that when aggregate price levels rise:

the real value of savings accounts, bonds, and cash declines

Aggregate expenditures are equal to:

the total of consumption plus investment plus government expenditures plus exports minus imports

If income is $50,000, consumption is $47,500, and saving is $2,500, and then the average propensity to consume is:

0.95

According to the balanced budget multiplier, an increase in government spending of $10,000 that is financed by an increase of $10,000 in taxes will have what effect on the economy when MPC is 0.80?

Income will increase by $10,000

Which of these is NOT a benefit of countries adopting the Euro?

It becomes easier to address regional differences in economic performance.

In an AD/AS model, if the economy is below its long-run output, what will happen in the long run if the markets are left alone?

SRAS will shift right

What is the main claim of the aggregate expenditures model?

Spending will generate income, which allows for more spending.

Which of the following fiscal policies would least likely result in an increase in aggregate supply?

an increase in business regulations

Which of the following factors would most likely shift the SRAS curve to the right?

an increase in the use of truck panels and tails to improve fuel efficiency

Fill in the blanks in this imaginary news article: "The value of the Indian rupee _______ in response to the Federal Reserve's announcement that it would continue its economic stimulus, making Indian exports to the US _______."

increased; drop

The most important measure in determining whether a country's national debt is a significant problem is:

interest paid on the national debt as a portion of GDP

If monetary policy is tight:

the dollar will rise

When consumer confidence falls in an economy, ______ increase in an economy and this amount is _____ by the multiplier.

withdrawals; enhanced