OLD 88

Which of the following is NOT a tool of fiscal policy?

changes in the money supply

When banks borrow from and lend reserves to each other, they are participating in the _____ market.

federal funds

A reserve ratio is the:

fraction of deposits that the bank is required to hold as reserves.

A contractionary fiscal policy is one that reduces aggregate demand by decreasing:

government purchases.

Discretionary fiscal policy refers to changes in:

government spending or taxes to close a recessionary or inflationary gap.

To change the money supply, the Federal Reserve most frequently uses:

open-market operations.

A cut in taxes will have the most effect on aggregate demand if it is given to:

people with a high marginal propensity to consume.

Public debt is:

the total debt owed by the government to individuals and institutions outside of government.

Government payments to households for which no good or service is provided in return are called:

transfer payments.

The money multiplier is equal to:

1 divided by the reserve ratio.

The Federal Reserve System was established in:

1913.

The Federal Reserve System is the _____ for the United States.

central bank

In the United States, the institution that is charged with determining the size of the monetary base and with regulating the banking system is the:

Federal Reserve.

(Figure: Short- and Long-Run Equilibrium II) Look at the figure Short- and Long-Run Equilibrium II. Which of the following would be the appropriate response on the part of the government upon viewing the state of the economy?

Raise tax rates to close the inflationary gap.

The government's budget balance is:

T - G - TR.

Normally the discount rate is _____ the federal funds rate.

above

An inflationary gap occurs when:

actual output exceeds potential output.

The federal funds rate is the interest rate at which:

banks borrow from other banks with excess reserves.

The guarantee by the FDIC to reimburse bank customers up to $250,000 per deposit in the event of bank problems is called:

deposit insurance.

(Figure: Short- and Long-Run Equilibrium) Look at the figure Short- and Long-Run Equilibrium. If the economy is at equilibrium at E1, the government should use _____ fiscal policy to shift the aggregate demand curve to the _____ .

expansionary; right

Spending promises made by the government that are effectively a debt, although they are not included in the usual debt statistics, are known as:

implicit liabilities.

If overall spending declines and thus the economy contracts, the government could counter this by:

increasing government spending.

Holding everything else constant, the multiplier effect for taxes is _____ that for changes in autonomous aggregate spending.

less than

If banks were required to keep 100% of deposits in reserves, they could:

make no loans.

To decrease the money supply, the central bank could:

make open-market sales.

Expansionary fiscal policy shifts the aggregate demand curve to the _____ and is used to close a(n) _____ gap.

right; recessionary