Econ module 25, module 24 econ, module 23 econ, Module 21, Module 20 Econ, Economics Module 19, Econ test 3

The formula for the rate of return is_____________.

(the revenue from a project − the cost of a project) / (the cost of a project) × 100

If the marginal propensity to consume (MPC) = 0.76, what is the marginal propensity to save (MPS) equal to?

0.24

According to Monetarism,

All of the above

In the 1960s,

All of the above

The short-run Phillips curve (SRPC)

All of the above

Which of the following can a bank do?

All of the above

A bank's assets include bank deposits it holds.

False

A decrease in the aggregate demand (AD) curve is illustrated by a rightward shift.

False

A decrease in the short-run aggregate supply curve is illustrated by a rightward shift.

False

A financial asset is a claim on a tangible object such as a painting.

False

A loan is considered a claim on a bank that helps the bank give a depositor cash when demanded.

False

A mutual fund sells policies that guarantees payment to a policyholder's beneficiary when the policyholder dies.

False

A positive budget balance occurs whenever there is a government budget deficit.

False

According to the Fisher effect, the real interest rate is affected by changes in expected inflation.

False

According to the interest rate effect, a higher aggregate price level will reduce the purchasing power of households' wealth and consumer spending.

False

Aggregate output is measured by nominal gross domestic product (GDP).

False

An example of an illiquid asset is gold.

False

An example of expansionary fiscal policy would be to increase taxes.

False

An investment bank is a type of deposit-taking bank that specializes in issuing home loans.

False

Changes in government transfers and taxes has a direct effect on the economy.

False

Domestic savings refers to savings derived from foreigners.

False

In the short run, the economy is self-correcting meaning the economy eventually moves back to potential output.

False

Investment spending that is planned refers to actual sales being either more or less than businesses expected.

False

Medicare covers the majority of the cost of healthcare for Americans who have low incomes.

False

Money refers to the total value of financial assets in the economy.

False

Net capital inflow refers to exports minus imports.

False

The Federal Open Market Committee is an institution that oversees and regulates the banking system and therefore controls the monetary base.

False

The Federal Reserve was established in 1933 in response to the Great Recession.

False

The Great Moderation refers to the period in the US economy from 2007 to 2009.

False

The M2 is considered the narrowest definition of the overall money supply since it includes the most liquid assets.

False

The federal government indirectly controls government spending (G).

False

The long-run Phillips curve (LRPC) is downward sloping in the long run.

False

The multiplier formula associated with changes in G is expressed mathematically as MPC/(1−MPC).

False

The nominal wage rate has been adjusted for inflation.

False

The nonaccelerating inflation rate of unemployment (NAIRU) is another name for actual rate of unemployment.

False

The reason why the short-run aggregate supply curve is positively sloped is due to the fact that wages are fully flexible in the short run.

False

The reserve ratio refers to the bank's reserves held over its required reserves.

False

The supply of loanable funds curve is downward sloping.

False

There is an indirect relationship between the quantity of loanable funds supplied and the interest rate.

False

When deflation is unexpected, borrowers are benefited and lenders are hurt.

False

The ___________states that the real interest rate is unaffected by changes in expected inflation.

Fisher effect

The _____________refers to a period in the US economy from 1985 to 2007 when there was low inflation and relatively small fluctuations in economic activity.

Great moderation

Which of the following scenarios would cause the aggregate demand (AD) curve to shift to the right?

If households' and businesses have positive expectations regarding the future economy

Which of the following was the highest source of government tax revenue in the United States in 2018?

Individual Income Taxes

J10 represents which of the 12 regional federal reserve banks?

Kansas City

A _______________is a lending agreement between a borrower and a lender.

Loan

Which of the following is a function of the Federal Reserve System?

Maintaining Stability

Which of the following is an important factor that causes the supply of loanable funds curve to shift?

NOT If there are changes in the governments borrowing

Which of the following is a type of a financial intermediary?

None of the above

Which of the following is a type of a financial intermediary?

Not stocks

Classical macroeconomic theory is considered ______________.

Pro-capitalism

Which of the following is an example of a positive aggregate supply shock?

THE ANSWER IS NOT When aggregate output increases

Which government agency is responsible for printing paper money in the United States?

The Bureau of Engraving and Printing

The _____________________refers to the total value of all financial assets in the economy considered money.

The money supply

A commercial bank accepts deposits and is covered by the Federal Deposit Insurance Corporation (FDIC).

True

A function of the Federal Reserve System is to provide financial services to commercial banks such as clearing checks and holding reserves.

True

A hurricane or other type of natural disaster would cause a negative aggregate supply shock therefore increasing the firms' cost of production in the short run.

True

A negative aggregate supply shock can lead to stagflation.

True

A requirement to pay income in the future is referred to as a liability.

True

A type of financial intermediary would be a pension fund.

True

Aggregate demand and aggregate supply shocks only occur in the short run.

True

An example of commodity money would be crude oil.

True

At the equilibrium interest rate, the quantity of loanable funds demanded equals the quantity of loanable funds supplied.

True

Discretionary monetary policy is still considered an area of dispute among the Modern Consensus.

True

Diversification is the act of investing in several different things in order to minimize losses.

True

Economist David Ricardo contributed to Classical macroeconomics with his Principle of Comparative Advantage.

True

Gold, silver, tobacco, and shells have all been used as money at one time in the United States.

True

If commodity prices were to fall, then the short-run aggregate supply curve would increase.

True

If there are higher levels of investment spending by businesses in the economy, the aggregate demand (AD) curve will shift to the right.

True

In the short run, the firm's cost of production is fixed.

True

John Maynard Keynes was a strong proponent of fiscal policy to help stabilize the economy.

True

One of the main tasks of a financial system is to provide liquidity.

True

Planned aggregate spending is equal to consumer spending plus planned investment spending.

True

Rules set by the Federal Reserve that determine the minimum reserve ratio for a bank are reserve requirements.

True

The Federal Open Market Committee consists of the Board of Governors, the President of the New York Federal Reserve Bank in addition to five other regional Federal Reserve Bank presidents.

True

The aggregate consumption function shifts upward when aggregate wealth increases.

True

The concept of crowding out reduces overall investment spending in the economy.

True

The discount rate is known as the interest rate that the Federal Reserve charges on loans to banks.

True

The expected inflation rate is considered the most important factor affecting the inflation rate.

True

The federal funds market allows banks who fall short of the reserve requirement to borrow funds from banks with excess reserves.

True

The loanable funds market includes many financial markets such as stock and bond markets.

True

The long-run aggregate supply curve is vertical in the long run because the aggregate price level does not affect aggregate output in the long run.

True

The magnitude of the shift of the aggregate demand curve is determined by the value of the multiplier.

True

The nonaccelerating inflation rate of unemployment (NAIRU) refers to the unemployment rate where inflation does not change overtime.

True

The size of the money multiplier is reduced when funds are held as cash rather than as checkable deposits.

True

The two types of savings are domestic and foreign.

True

When there is deflation in the economy, it is more likely that interest rates will approach the zero bound.

True

The Federal Reserve system is headquartered in?

Washington D.C.

The Phillips curve is named after____________.

William Phillips

The expected inflation rate refers to the inflation rate that ________ and ________ expect in the future.

Workers employers

A bank is....

a type of financial intermediary that provides liquid assets to lenders using those funds to finance illiquid investments or investment spending needs for borrowers.

The NASDAQ is...

an index of the prices of the stocks of newer, smaller companies typically involved in high-tech industries.

The demand curve for loanable funds slopes upward.

false

John Maynard Keynes (1883-1946) is associated with ____________.

none of the above

The three main tasks of a financial system include....

reducing risk, providing liquidity, and reducing transaction costs

Today, nearly all macroeconomists accept the natural rate hypothesis.

true