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Which of the following is the most important in increasing a nation's economic growth in the long run?

Higher rates of technological change.

An equal increase in government purchases and taxes will cause

an increase in real GDP.

In the figure above, the movement from point A to point B in the money market would be caused by

an open market sale of Treasury securities by the Federal Reserve.

Fiat money

has no or very little value except as money

A car dealer sells you a car today in exchange for money in the future. This illustrates which function of money?

standard of deferred payment

Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability, high rates of economic growth, and high employment.

taxes; expenditures

Following a decrease in government spending, as the price level falls we would expect the level of interest rates to ________ and investment to ________.

decrease; increase

An increase in government purchases of $200 billion causes aggregate demand to shift ultimately from AD1 to AD2. Assuming a constant price level, the difference in real GDP between point A and point B will be ________ $200 billion.

greater than

In the figure above, if the economy is at point A, the appropriate countercyclical monetary policy by the Federal Reserve would be to

lower interest rates.

Reducing the marginal tax rate on income will

reduce the tax wedge faced by workers and increase labor supplied.

If the Fed lowers its target for the federal funds rate, this indicates that

the Fed is pursuing an expansionary monetary policy.

(Table) According to the table, the GDP for 2010 was: GDP Expenditures for 2010

$14,592.3 billion.

Suppose commercial banks have no excess reserves. Then new deposits totaling $1 billion come into the banking system. The required reserve ratio is 20 percent. What is the maximum amount by which banks can increase deposits in the entire banking system?

$5.0 billion.

(Table) The following table shows data on consumption at various levels of income. The value of the MPC (marginal propensity to consume) is:

0.90.

(Table) According to the table, what is the unemployment rate of this economy?

14.3%

If the Federal Reserve tries to target inflation near 2%, the inflation rate is 3%, and output is 3% below potential GDP, then the target federal funds rate according to the Taylor rule is:

4%.

The Consumer Price Index (CPI) in an economy is equal to 180 in 2016 and is equal to 189 in 2017. The rate of inflation in the economy over that year period is:

5 percent.

Suppose the Fed increases the money supply. Which of the following is true?

At the original interest rate, the quantity of money demanded is less than the quantity of money supplied.

If the federal government's expenditures are less than its tax revenues, then

a budget surplus results.

(Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD1 to AD2?

a decrease in interest rates

In the figure above, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Federal Reserve use to move the economy to point C?

buy Treasury bills

(Figure: Shifts in SRAS and AD) If the economy is at short-run equilibrium point b because of a negative supply shock, the Federal Reserve could enact an expansionary monetary policy, thus shifting the new equilibrium to point _____. As a result of this, the price level would _____ and real output would _____.

c; further increase; increase

An increase in the domestic interest rate relative to other interest rates should

decrease consumption spending

Consider the hypothetical information in the table above for potential real GDP, real GDP and the price level in 2011 and in 2012 if the Congress and the president do not use fiscal policy. If the Congress and the president want to keep real GDP at its potential level in 2012, they should

decrease government purchases.

An increase in the money supply will

decrease the interest rate.

Paper currency is a

fiat money

A barter economy is an economy where

goods and services are exchanged for other goods and services.

Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP?

increase government spending

In the graph above, if the economy is at point A, an appropriate fiscal policy by the Congress and the president would be to

increase government transfer payments.

The multiplier effect is the series of ________ increases in ________ expenditures that result from an initial increase in ________ expenditures.

induced; consumption; autonomous

An increase in real GDP can shift

money demand to the right and increase the interest rate.

It is ________ difficult to effectively time fiscal policy than monetary policy because _________

more; fiscal policy takes longer to implement

Government deficits tend to increase during

periods of war and recession.

(Figure: Aggregate Demand and Supply) The graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. The movement from point a to point b is due to:

workers and suppliers adjusting their expectations to higher price levels.


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