Macroeconomics

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If the Fed wants commercial banks to borrow and expand their reserves by a specific amount, what monetary policy tool best guarantees that it will happen?

term auction facility

Economic systems differ according to what two main characteristics?

Ownership of resources, and methods of coordinating economic activity.

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect

the supply to increase as farmers plant more corn.

The major problem facing the economy is high unemployment and weak economic growth. The inflation rate is low and stable. Therefore, the Federal Reserve decides to pursue a policy to increase the rate of economic growth. Which policy changes by the Fed would reinforce each other to achieve that objective?

Buying government securities and lowering the discount rate

The tools of monetary policy for altering the reserves of commercial banks are the

Discount rate, reserve ratio, and open-market operations

A price ceiling in a competitive market will result in persistent surpluses of a product.

False

From the "economic perspective" people make purposeful decisions based on hypotheses

False

In the cause-effect chain, a restrictive money policy increases the money supply, decreases the interest rate, increases investment spending, and increases aggregate demand.

False

Supply refers to the amount of a product that a producer will offer in the market at some particular price.

False

The economy of the United States can best be described as pure capitalism.

False

If the price of a product increases, we would expect

Quantity supplied to increase

A consumer holds money to meet spending needs. This would be an example of the

Transactions demand for money

Economic rivalry, or competition, requires buyers and sellers in the market.

True

If nominal GDP is $2,000 billion and the amount of money demanded for transactions purposes is $500 billion, then on average each dollar will be spent about four times.

True

The Federal funds rate is the rate that banks charge other banks for overnight loans of excess reserves at Federal Reserve banks.

True

The fundamental economic problem is that productive resources are scarce in relation to the demand for them

True

The alternative combinations of two goods which a consumer can purchase with a given money income is

a budget line

An economic system in which money is not used is a

barter economy

By consumer sovereignty we mean that

consumers determine what goods and services are produced.

Points C, D, E, and H on the above graph show:

possible combinations of food and clothing

Which is characteristic of the market system?

free enterprise and choice

Economics is the study of

how people, institutions, and society make choices under conditions of scarcity.

A market

is an institution that brings together buyers and sellers.

From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the

marginal cost of waiting is greater than the marginal benefit of being served.

The demand for most products varies directly with changes in consumer incomes. Such products are known as

normal goods.


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