Exam 3 Macroeconomics

B) requires action by the Congress

A discretionary fiscal policy is a fiscal policy that

B) decreases; labor supply; leftward

An income tax __________ potential GDP by shifting the _________ curve_________.

B) lower, increasing

At the end of 2012, the Fed was buying about $100 billion of securities per month, a much higher amount than normal. These purchases would ___________ the value of the dollar on foreign exchange markets thereby _________ US exports

A) cut; increased

During the Reagan administration in the 1980s, tax rates were __________ and the budget deficit __________.

B) providing the banking system with enough liquidity

During the financial crisis of 2008-2009, the Fed was concerned about

B) banks

Federal Reserve open market operations directly influence

D) decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue

Fiscal policy includes _______

B) increased

For the years 2011 and 2012, the Social Security payroll tax was reduced by 2 percentage points. This reduction _________ the fiscal imbalance.

A) $1000

If $1000 is invested at 3 percent per year for 10 years the investment grows to $1343.92. This means the present value $1343.92 at an interest rate of 3 percent 10 years from now is _______.

C) the federal funds rate rises

If the Fed sells US government securities

B) sell US government securities

If the Fed wants to decrease the quantity of money, it can

C) shift the labor supply curve to the right

In 2007, Germany increased the value added tax (VAT) on consumption from 16 percent to 19 percent. The supply-side view, this will ______.

B) low; aggregate demand

In 2012, Ben Bernake said that Fed policy had raised real GDP by almost 3 percent. Mr. Bernake believes that the Fed's policy of keeping the federal funds rate ________ had resulted in an increase in _________.

A) the inflation rate will rise

In March 2013 the Fed announced that it might decrease its open market purchases of securities by the end of the year. This announcement suggests that the Fed is concerned that

B) a rightward shift in the supply of labor curve

In October 2008, President Bush enacted the Alternative Minimum Tax Relief Act of 2008, which resulted in lower taxes on labor income. According the supply-side view, this would result in

D) inflation and unemployment

In the short run, the Federal Reserve faces a tradeoff between

C) tax revenues increase when income increases, thus offsetting some of the increase in aggregate demand

Income taxes in the United States are part of automatic fiscal policy because

B) changing aggregate demand

Monetary policy affects real GDP by _______

A) the Federal Reserve

Monetary policy is controlled by

B) inflation rate

Monetary policy produces ripple effects, some of which happen quickly and some that can take years to produce change. Which of the following takes the longest to change?

C)decreases

On January 1, 2013 the income tax for single taxpayers making more than $400,000 per year increased from 35 percent to 39.6 percent. This tax increase _________ potential GDP.

C) increases; increases

Taking account of the supply-side effects, a tax cut on labor income __________ employment and _________ potential GDP

C) automatic fiscal policy

Taxes and government expenditures that, without need for additional government action, change in response to changes in the level of economic activity are examples of ______.

A) helps the president and the public stay informed about the state of the economy

The Council of Economic Advisers

A) LIBOR

The European equivalent to the fed funds rate is:

A) keeping the unemployment rate close to the natural unemployment rate

The Federal Reserve monetary policy goals of maximum employment means

C) increase; decreases; increase

The People's Bank of China announced that it was lowering by 1.08 percentage points the one-year lending rate in response to the slowdown in the Chinese economy. This rate is the Chinese equivalent of the federal funds rate in the United States. This policy_______ the supply of loanable funds. As a result, the long-term real interest rate ______, and planned expenditures __________.

C) Fed should adjust the federal funds rate to take account of deviations of inflation from its target and real GDP from potential GDP.

The Taylor Rule states that the _____.

C) has mostly been in deficit during the past 30 years

The US government's budget

D) decreases; decreases; falls

The central bank of Cobra sells securities in an open market operation. In the short run, aggregate demand_________, real GDP ________, and price level ________.

B) Janet Yellen

The current chairman of the Federal Reserve is

B) banks charge each other on overnight loans

The federal funds rate is the interest rate

C) total tax revenue minus total government outlays

The government's budget deficit or surplus equals the

C) maintain low inflation

The key goal of monetary policy is to _______.

C) lower benefits and increase tax revenues

To eliminate the fiscal imbalance the government could

B) buy government securities in an open market operation

To increase the quantity of money in the economy, the Federal Reserve is likely to

C) can keep investment low

Uncertainty about monetary policy

C) discretionary fiscal policy

Unemployment insurance are payments made to unemployed workers. Typically workers are paid for no more than 26 weeks. In December 2012, the federal government passed legislation that would extend the payments to a maximum of 73 weeks. This extension is an example of

B) buy; rises

When the Fed raises the federal funds rate, in the foreign exchange market people ________ dollars and the price of the dollar __________ on the foreign exchange market.

A) price level stability

Which of the following is one of the Fed's policy goals?