ECO 202 Exam 2

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When the economy is in long-run macroeconomic equilibrium

-SRS=AD=LRAS -total unemployment= frictional + structural unemployment -actual GDP = potential GDP

Policy goals of the federal reserve banks incldue

-Stable financial markets -Low unemployment -Higher living standards

Functions of money include

-Store of value -Medium of exchange -Unit of account

Which of the following factors brought on the recession of 2007-2009?

-The end of the outing bubble -The financial crisis -A rapid increase in the price of oil (all of the above)

Which of the following is not one of the monetary policy goals of the Federal Reserve​ ("the Fed")?

A high foreign exchange rate of the US dollar relative to other currencies

Which of the following is NOT a correct statement about M2?

M2 is the best definition of money as a medium of exchange

Which can be changed more​ quickly: monetary policy or fiscal​ policy?

Monetary policy can be changed more quickly than fiscal policy. Monetary policy can be changed at any of the FOMC meetings and the smaller number of individuals involved makes it easier to change policy.

Which of the following is included in M2 but not M1?

Money Market deposit accounts in banks

What did Geithner mean by the "non-bank financial system"?

Money Market mutual funds, hedge funds and other financial firms that raise money from investors and provide it to firms and households

What is the disadvantage of holding money?

Money in the form of currency or checking account deposits earns either no interest or a very low rate of interest

Changes in taxes and spending that happen without any actions by the government are called

automatic stabilizers

Why does the failure of workers and firms to accurately predict the prices level result in an upward-sloping aggregate supply curve?

because the contracts between workers and firms make some wages and prices "sticky", because menu costs make some prices "sticky" and because firms are often slow to adjust wages. (all of the above)

The largest and fastest-growing category of federal expenditure is

transfer payemtns

When the economy is experiencing an expansionan expansion automatic stabilizers will​ cause:

transfer payments to decrease and tax revenues to increase

If coins could have been used to purchase goods and services in other areas, the coins would also have some intrinsic value

true

If the Fed believes the inflation rate is about to increase it should

use a contractionary monetary policy to increase the interest rate and shift AD to the left

If the Fed believes the economy is about to fall into recession it should

use an expansionary monetary policy to lower the interest rate and shift AD to the left

When the Federal Open Market Committee​ (FOMC) decides to increase the money​ supply, it _______ U.S. Treasury securities. If the FOMC wishes to decrease the money​ supply, it _______ U.S. Treasury securities.

buys; sells

An initial decrease in the bank's reserves will decrease checkable deposits

by an amount greater than the decrease in reserves

Which of the following is not a policy tool the Federal reserve uses to manage the money supply?

changing income taxes

The​ Fed's strategy of increasing the money supply and lowering interest rates in order to increase real GDP is called

expansionary monetary policy

The interest rate that the banks charge each other for overnight loans is called the

federal funds rate

The US dollar can best be described as

fiat money

If you move $100 from your savings account to your checking account, then M1 will

increase by $100 and M2 will remain the same

The Feral Reserve Bank of New York is always a voting member of the FOMC because

it carries out the policy directives of the FOMC

The federal government would not want to increase its​ spending, even if the result were to increase real GDP and employment in the short​ run, if

it would lead to a greater federal deficit and an increase in the national debt

If the economy grows into a recession, monetarists argue that the Fed should

keep the money supply growing at a constant rate

Checking account deposits are the

largest portion of the M1 money supply.

The federal​ government's day-to-day activities include running federal agencies like the Environmental Protection​ Agency, the​ FBI, the National Park​ Service, and the Immigration and Customs Enforcement. Spending on these types of activities make up

less than 10 percent of federal government expenditures

As a result of crowding out LOADING... in the short​ run, the effect on real GDP of an increase in government spending is often

less than the increase in government spending

When interest rates on Treasury bills and other financial assets are​ low, the opportunity cost of holding money is​ _________, so the quantity of money demanded will be​ _________.

low; high

Suppose you withdraw​ $1,000 from a money market mutual fund and deposit the funds in your bank checking account. How will this action affect M1 and​ M2?

m2 will not be effected but M1 will increase

When sellers are willing to accept money in exchange for goods and services, money is acting as a

medium of exchange

An increase in government purchase and a faster income growth in other countries will cause a

rightward shift of the US aggregate demand curve

Which of the following refers to the minimum fraction of deposits banks that are required to keep by law to keep as reserves

the required reserve ratio

The position of the long-run aggregate supply curve is determined by

the number of workers, the amount of capital and the available technology

One of the goals of the Federal Reserve is price stability. For the Fed to achieve this​ goal,

the rate of inflation should be low, such as 1% to 3% and should be fairly consistent

when the federal reserve purchases treasury in the open makret

the sellers of such securtiries deposit the finds in their banks and bank reserve increases

The quantity theory of money is better able

to explain the inflation rate in the long run

When Congress established the Federal Reserve in​ 1913, its main responsibility was

to make discount loans to banks suffering large withdrawals by depositors

The wealth effect refers to the fact that

when price level falls, the real value of household wealth rises and so will consumption

According to the AD-AS model, what is the most common cause of inflation?

-Total Spending increases faster than total production -AD increase by more than LRAS -The US mint prints too much currency

Which of the following is true with respect to Irving Fisher's quantity equation, M x V = P x Y

-V= the average number of times a dollar is spent on goods and services -M= M1 definition of the money supply -P= the GDP deflator -Y = real GDP - V= (P x Y) /M (all of the above)

The aggregate demand curve slopes downward because

-a lower price level makes US exports less expensive, thereby increasing net exports -a lower price level decreases the rate of interest, which increases private investment and consumption -a lower price level increases the real wealth of households, thereby increasing household consumption

The aggregate demand curve slopes downward for all of the following reasons EXCEPT

-a lower price level makes imports from other countries less expensive, and US citizens buy more imports

The SRAS curve will shift to the left if

-an increase in the expected price of an important natural resource -an increase in the adjustment of workers and firms prior underestimation of the price level -increase in expected future prices

The Aggregate Demand Curve (AD) would shift to the right if there was a

-decrease in taxes, -decrease in the US exchange rate relative to other currencies -lower interest rates -increased consumer optimism

The (FOMC) Federal Open Market Committee

-determines the target federal funds rate and the direction of open market operation policies. -includes the Board of Governors and the presidents of the 12 Federal Reserve regional banks​ (though not all are voting​ members). -makes decisions that are voted on by all 7 members of the Board of Governors but only 5 of the 12 regional bank presidents. (all of the above)

Why does the SRAS curve slope upward?

-firms and workers fail to predict the changes in price level -contracts keep wages "sticky" -Prices of final goods rise more quickly than the prices of inputs (all of the above)

Aggregate demand (AD) is comprised of expenditure components that include

-government spending -consumption, -investment -net exports

The following are true in regards to hyperinflation

-in the presence of hyperinflation, firms and households avoid holding money -it can be hundreds or even thousands of percentage points per year -it is caused by central banks increasing the money supply at a rate much greater than that growth rate of real GDP (all of the above)

Which of the following factors will cause the long-run aggregate supply curve to shift to the right?

-technological change -an increase in the number of workers in the economy -the accumulation of more equipment and machinery (all of the above)

The aggregate demand curve slopes downward due to

-the wealth effect -the interest-rate effect -the international-trade effect -the international-trade effect

The SRAS will shift to the right if

-there is a positive technological change -increase in the labor force -increase in productivity

The SRAS will shift to the left if

-there is an increase in the expected price of an important natural resource -a higher expected future price level -a decrease in capital stock

The SRAS curve will shift to the right when

-there is an increase in the labor force or capital accumulation -an increase in productivity -a technological change

What is price deflation?

A fall in the price level

Why would deflation cause​ "shoppers to hold​ back," and what does​ Evans-Pritchard mean when he​ says, "Once this psychology gains a​ grip, it can gradually set off a​ self-feeding spiral that is hard to​ stop"?

Consumers delay purchases, expecting prices to fall more and the lack of demand causes prices to fall further

In addition to the Federal Reserve Bank, what other economic actors influence the money supply?

Households, firms and banks

Which of the following statements is true?

In the long run, changes in the price level of not affect the level of real GDP

What is a "classic type of run"?

Many depositors simultaneously decide to withdraw money from the bank.

A movement from point A to B along the Aggregate demand curve could be the result of

a change in the price level

The international trade effect refers to the fact that an increase in the price level will result in

a decrease in exports and an increase in imports

If the economy adjusts through the automatic mechanism, then a decline in the aggregate demand causes

a recession in the short run and a decline in the price level in the long run

An increase in state income taxes and interest rates will cause

a rightward shirt of the aggregate demand curve

Which is usually the cause of stagflation?

a supply shock as a result of unexpected increase in the price of a natural resource

The aggregate demand curve is downward sloping because

an increase in the price level reduces real money holdings, which reduces the amount of expenditures

How does the dynamic model of a aggregate supply and aggregate demand explain inflation?

by shadowing that if total spending in the economy grows faster than total production, prices will rise

How does the dynamic model of aggregate supply and aggregate demand explain inflation?

by showing that if total spending in the economy grows faster than total production, prices will rise

The amount of US currency outstanding averages to about 2800 per person in the US. This large amount of currency per person can be panically explained because

many US dollars are held outside of the country by foreigners

The aggregate demand curve shows the relationship between the

price level and the output demanded

increase in the value of the dollar relative to foreign currencies will make the aggregate demand curve

shift to the left

A change in consumption will cause a (Federal Government will increase taxes in an attempt to reduce a budget deficit)

shift to the left in the aggregate demand curve

A technological change will cause the long-run aggregate supply (LRAS) curve to

shift to the right

A change in investment will cause a (Firms become more optimistic and increase their spending on machines and equipment)

shift to the right in the aggregate demand curve

When the Federal Reserve sells Treasury securities in the open market

the buyers of these securities pay for them with checks and the banks reserves fall

On a downward sloping Aggregate Demand Curve (AD) a movement along the line would be the result of

the wealth effect or the interest rate effect

The Short-Run Aggregate Supply curve shifts from the right to the left if

there is an increase in the expected price of an important natural resource or an increase in the expected future price level

The Short-Run Aggregate Supply curve shifts from the left to the right if

there is an increase in the labor force or capital stock or there is an improvement in technology

Which of the following are categories of federal government​ expenditures?

-Grants to state and local governments -interest on the national debt -transfer payments (all of the above)

The following statements are correct about M2

-M2 includes savings accounts, small-donation time deposits and money-market mutual funds -M2 includes all the assets in M1 -M2 is a broader definition of money compared to M1 and currency

Suppose that velocity is 3 and the money supply is​ $600 million. According to the quantity theory of​ money, nominal output equals

$1.8 billion

Suppose the reserve requirement is 15%. What is the effect on total checkable deposits in the economy if bank reserves increase by $40 billion.

$267 billion increase

Suppose that Deja owns a​ McDonald's franchise. She decides to move her​ restaurant's checking account to Wells​ Fargo, which causes the changes shown on the following​ T-account. Wells Fargo Assets Liabilities Reserves ​ +$100,000 Deposits ​ $100,000. If the required reserve ratio is 15% and Wells fargo has no excess reserves, The maximum loan Wells Fargo can make as a result of this transaction is

$85000

Which of the following is a monetary policy tool used by the Federal Reserve Bank?

-Buying 500 mil worth of government securities such as Treasury bills -Decreasing the rate at which banks can borrow money from the federal reserve -increasing the reserve requirement from 10 percent to 12.5 percent (all of the above)

M1 money supply equals

-Currency and coin held by the public -Checking account balances -Travelers Checks (1510)

Which of the following are tools the Federal reserve uses to manage money supply?

-Discount policy -open market operations -Reserve Requirements

The use of money

-reduces the transaction costs of exchange -eliminates the double coincidence of wants -allows for greater specialization (all of the above)

An article in the Wall Street Journal reported in 2015 that the​ People's Bank of​ China, which is the central bank of​ China, "is freeing up cash by reducing the amount that banks must keep in​ reserve." ​Source: Lingling​ Wei,​ "China Central Bank Checks Europe Playbook on​ Credit," Wall Street Journal​, April​ 19, 2015. -The monetary policy tool that the​ People's Bank of China was using was changes to the -This policy change would "free up cash" because -The peoples bank of china was hoping this policy action would

-required reserve ratio -reserves that were required are now excess reserves available for lending -stimulate economic growth

Suppose that the Federal Reserve makes a​ $10 million discount loan to First National Bank​ (FNB) by increasing​ FNB's account at the Fed. Complete the following​ T-account to show the impact of this transaction. Assume that before receiving the discount​ loan, FNB had no excess reserves LOADING... . The maximum amount of the​ $10 million that FNB can issue in loans is $10 million. Assume that the required reserve ratio is​ 10%. The maximum total increase in the money supply that can result from the​ Fed's discount loan is

100 million

Which of the following is an example of an expansionary fiscal​ policy?

A decrease in taxes

Which of the following is an example of an expansionary fiscal​ policy?

A decrease in taxes and a shift from left to right of the aggregate demand curve

When the Federal Reserve increases the discount rate as a part of a contradictory monetary policy, there is:

A decrease in the money supply and increase in the interest rate

Suppose the economy is initially in​ long-run equilibrium at point A. The government decides to decrease government spendingdecrease government spending. In the​ short-run, this contractionary fiscal policy will​ cause:

A shift from AD 2AD2 to AD 1AD1 and a movement to point​ D, with a lower price level and lower output.

Suppose the economy is initially in​ long-run equilibrium. The Fed enacts a policy to decrease the discount ratedecrease the discount rate. In the​ short-run, this expansionary monetary policy will​ cause:

A shift from AD1 to AD2 and a movement to point B, which higher price level and higher output

Which of the following is not true in terms of potential long run impacts of tax​ policies?

A tax rebate given one year will cause people to have more money and therefore they will spend more which will cause an increase in aggregate supply.

Functions of Money do not include

Acceptability

The figure to the right illustrates the economy using the Dynamic Aggregate Demand and Aggregate Supply Model LOADING... If actual real GDP in 2006 occurs at point B and potential GDP occurs at LRAS 06LRAS06​, we would expect the Federal Reserve Bank to pursue a contractionary monetary policy. If the​ Fed's policy is​ successful, what is the effect of the policy on the following macroeconomic​ indicators?

Actual real GDP decreases . Potential real GDP does not change . Price level decreases . Unemployment increases

If the​ Fed's policy is​ successful, what is the effect on the following​ indicators?

Actual real​ GDP: increases Potential real​ GDP: does not change Price​ level: increases ​Unemployment: decreases

The effect of a change in the federal funds rate on​ long-term interest rates is usually smaller than it is on​ short-term interest rates. B. A majority of economists support the​ Fed's choice of the interest rate as its monetary policy​ target, but some economists believe the Fed should concentrate on the money supply instead. C. Changes in the federal funds rate usually will result in changes in both​ short-term and​ long-term interest rates on financial assets.

All of the above are true

Which of the following, if true, will support Robin's Argument?

Almora's agriculture and manufacturing sectors have become less competitive in the world market

Suppose that at the same time Congress and the president pursue an expansionary fiscal​ policy, the Federal Reserve pursues an expansionary monetary policy. How might an expansionary monetary policy affect the extent of crowding out in the short​ run?

An expansionary monetary policy would decrease interest rates and this reduce the extent of crowding out

What is meant by Professor​ Spencer's statement​ "This printing of money​ 'will keep the​ [deflation] wolf from the​ door'"?

An increase in the money supply exceeds the rate of growth of GDP will increase the price level

How does an increase in the price level affect the quantity of real GDP supplied in the long run?

Changes in the price level do not affect the GDP in the long run

What is a contradictory fiscal policy?

Contradictory fiscal policy includes decreasing government spending and increasing taxes to decrease aggregate demand

What is meant by crowding​ out?

Crowding out is a decline in private expenditures as a result of increases in government purchases

The largest liability of a typical bank is

Deposits

Do you agree or disagree with the following​ statement? ​"I recently read that more than half of the money issued by the government is actually held by people in foreign countries. If​ that's true, then the United States is less than half as wealthy as the government statistics​ indicate."

Disagree. Money is currency plus checking deposits, wealth is the value of assets minus debt

Which of the following best explains how the economy will adjust from the short-run equilibrium point to the new long-run equilibrium point?

Due to the higher price level, workers will demand higher wages, and firms will raise prices and cause the SRAS to shift to he left to point C

What is an expansionary fiscal​ policy?

Expansionary fiscal policy includes increasing government spending and decreasing taxes to increase aggregate demand.

During​ 2005, the FOMC was concerned that the inflation rate would begin to accelerate due to the continued boom in the housing​ market, so the Fed started decreasing the target for the federal funds rate.

False

The multiplier effect is only a consideration for increases in government purchases.

False

Evaluate the following​ statement: Banks use deposits to make consumer loans to households and commercial loans to businesses. Banks will loan out every penny of their deposits in order to make a profit.

False. Banks must hold a fraction of their deposits as vault cash or with the Federal Reserve

Suppose that the economy is currently at potential​ GDP, and the federal budget is balanced. If the economy moves into​ recession, what will happen to the federal​ budget?

If the budget is balanced at potential GDP and the economy moves into a recession, then there will have been a budget deficit as government expenditures increase and tax revenues decrease

What changes should they make if they decide a contractionary fiscal policy is​ necessary?

In this​ case, Congress and the president should enact policies that decrease government spending and increase taxes.

If Congress and the president decide an expansionary fiscal policy is​ necessary, what changes should they make in government spending or​ taxes?

In this​ case, Congress and the president should enact policies that increase government spending and decrease taxes.

What actions can Congress and the president take to move the economy back to potential​ GDP?

Increase government spending or decrease taxes

What is the advantage of holding money?

It can be used to buy goods, services, or financial assets

What do economists mean by the demand for money?

It is the amount of money-currency and checking account deposits-that individuals hold

Which of the following is NOT a monetary policy goal of the Federal Reserve bank (The FEd)?

Low prices

Consider the figure to the right. Can the Fed achieve a​ $900 billion money supply​ (MS) AND a​ 5% interest rate​ (point C)?

No, the fed cannot target both the money supply and the interest rate simultaneously

Suppose the economy is in equilibrium in the first period at point A. In the second​ period, the economy reaches point B. What policy would the Fed likely pursue in order to move AD 2AD2 to AD Subscript 2 comma policyAD2, policy and reach equilibrium​ (point C) in the second​ period?

Open market purchase of government securities

Why does the short-run aggregate supply curve slope upward?

Profits rise when the prices of the goods and services firms sell rise more rapidly than the prices they pay for inputs.

Year Potential Real GDP Real GDP Price Level 2016 ​ $18.0 trillion ​ $18.0 trillion 150 2017 18.5 trillion 18.8 trillion 154 Consider the hypothetical information in the table above for potential real​ GDP, real​ GDP, and the price level in 2016 and in 2017 if the Federal Reserve does not use monetary policy. If the Fed uses monetary policy successfully to keep real GDP at its potential level in​ 2017, which of the following will be lower than if the Fed had taken no​ action?

Real GDP and the inflation rate

Why would deposit insurance provide the banking system with protection against runs?

Since most depositors are insured, it is less likely that panicked buyers will simultaneously withdraw funds.

As the figure to the right​ indicates, the Fed can affect both the money supply and interest rates.​ However, in recent​ years, the Fed targets interest rates in monetary policy more often than it does the money supply. Which interest rate does the Fed​ target?

The federal Funds Rate

Why would the Fed intentionally use contractionary monetary policy to reduce real​ GDP?

The Fed intends to reduce inflation, which occurs if real GDP is greater than potential GDP

Consider the following​ table: Year Potential GDP Real GDP Price Level 2012 ​$14.914.9 trillion ​$14.914.9 trillion 110 2013 ​$15.3 trillion ​$15.215.2 trillion 112112 What can we expect from the Federal Reserve Bank if it seeks to move the economy in the direction of​ long-run macroeconomic​ equilibrium?

The Fed will pursue an expansionary monetary policy

Who is responsible for fiscal Policy?

The Federal Government controls fiscal policy

What is the cyclically adjusted budget deficit or​ surplus?

The cyclically adjusted budget or deficit or surplus in the federal governments budget if the economy were at potential GDP

Which of the following, if true, will support Eric's view?

The economy of Northbay is expected to grow at a remarkable pace of 9 percent in the upcoming year.

Which of the following, if true, will strengthen Jim's claim?

The gap between the earnings of college graduates and non graduates is increasing

Why might cutting government spendingcutting government spending as a fiscal policy be a more difficult policy than the use of monetary policy to slow down an economy experiencing​ inflation?

The legislative process experiences longer delays than monetary policy

What are the Fed's main monetary policy targets?

The money supply and the interest rates

According to the quantity theory of money, inflation results from which of the following?

The money supply grows faster than real GDP

Explain whether you agree with this​ argument: If the Fed actually ever carried out a contractionary monetary​ policy, the price level would fall. Because the price level has not fallen in the United States over an entire year since the​ 1930s, we can conclude that the Fed has not carried out a contractionary policy since the 1930s.

The statement is false. A contradictory policy could result in lower rates of inflation rather than a fall in the price level

Consider the following​ statement: ​"The Fed has an easy job. Say it wants to increase real GDP by​ $200 billion. All it has to do is increase the money supply by that​ amount."

This statement is incorrect because an increase in the money supply does not affect the real GDP directly

Velocity is defined as

V=(P × Y)/M.

When is it considered​ "good policy" for the government to run a budget​ deficit?

When borrowing is used for long-lived capital goods

Which of the following is NOTTT true when the economy is in macroeconomic equilibrium?

When the economy is at long-run equilibrium, firms will have excess capacity.

Does government spending ever reduce private spending

Yes, due to crowding out

Suppose you withdraw $100 in cash from your checking account. Which one of the following choices reflects the transaction on the banks balance sheet?

Your banks balance sheet shows a decrease in reserves by $100 and a decrease in deposits by $100.

fractional reserve banking system, what is the difference between a "bank run" and a "bank panic"

a bank run involves one bank and a bank panic involves many banks

A shift from left to right of the Aggregate demand curve could be the result of

a change in expectations of households

A movement along the SRAS from point A to point B (along one line) could be the result of

a change in the price level

President Trump was assuming that in 2017, the economy was

able to create more jobs and expand without increasing the inflation rate

If the economy is initially at full-employment equilibrium, then an increase in aggregate demand causes

an increase in real GDP in the short run and an increase in the price level in the long run

When actual GDP is below potential GDP the budget deficit increases because​ of:

an increase in transfer payments and a decrease in tax revenues

Reserve requirements are changed infrequently because

banks set long-term policy decisions, loan decisions and deposit based on the reserve requirements.

Fiscal policy

can be described as changes in government spending and taxes to achieve more macroeconomic policy objectives

The demand curve for an individual product sloped downward

due to consumers substituting the more expensive product for cheaper goods

From an initial longminus−run macroeconomic​ equilibrium, if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than longminus−run aggregate​ supply, then the Federal Reserve would most likely

decrease interest rates

If the government cuts taxes in order to increase aggregate demand, the action is called a

discretionary fiscal policy

A change in price level

does not cause the AD curve to shift (movement along)

The interest rate effect refers to the fact that a higher price level results in

higher interest rates and lower investment

Credit cards are

included in neither the M1 definition of the money supply nor the M2 definition

The list of the determinants of potential GDP is

incorrect since changes in the expected price level affect short run aggregate supply but not the long run aggregate supply

With an expansionary monetary​ policy, investment,​ consumption, and net exports all​ ________, which results in the aggregate demand curve shifting to the​ ________, increasing real GDP and the price level.

increase; right

The Federal Reserve cannot affect the price levelthe price level ​directly; therefore, the Fed typically uses the following as its policy​ target:

interest rates

The short-term nominal interest rate

is considered the most relevant interest rate when conducting monetary policy

The federal Funds rate

is the rate that banks change each other for short-term loans of excess reserves

A change in price level will cause a (The US economy experiences a 4% inflation)

movement along the aggregate demand curve

An increase in the price level will cause _________________ the aggregate demand curve.

movement up along

Suppose the economy is in equilibrium in the first period at point A. In the second​ period, the economy reaches point B. What policy would the Fed likely pursue in order to move AD 2AD2 to AD Subscript 2 comma policyAD2, policy and reach equilibrium​ (point C) in the second​ period? ​ (What policy will increase the price level and increase actual real​ GDP?)

open market purchase of government securities

M1 includes more than just currency because

other assets can also be used to make transactions to buy goods and services

A baseball fan with a Mike Trout baseball card wants to trade it for a Giancarlo Stanton baseball​ card, but everyone the fan knows who has a Stanton card​ doesn't want a Trout card. Economists characterize this problem as a failure of the

principle of a double coincidence of wants

Which of the following policy tools is the Federal Reserve least likely to use in order to actively change the money supply?

reserve requirements

Increasing government purchases

shifts the AD curve to the right

Congress broadened the Fed's responsibly since

the 1930s as a result of the Great depression

Monetary policy is defined​ as:

the actions the Federal Reserve takes to manage the money supply and the interest rates

In​ 2017, in proposing a​ $1 trillion increase in government spending on​ infrastructure, President Trump argued that the spending would increase total employment in the United States. ​Source: Ted Mann and Michael C.​ Bender, "President Trump to Launch Push for Infrastructure​ Investment," Wall Street Journal​, June​ 4, 2017. In the short​ run, increases in federal spending will increase real GDP and employment if

the economy is producing at less than its potential output and has some cyclical unemployment

A double coincidence of wants refers to

the fact that for a barter trade to take place between tow [people, each person must want what the other has.

A movement from point A on one line to point B on the other line of a SRAS curve could be the result of a change in

the labor force

If the price level decreases

the money demand curve shifts to the left

If real GDP increases

the money demand curve shifts to the right

Which of these variables are the main monetary policy targets of the​ Fed?

the money supply and the interest rates

A decrease in interest rates because of a monetary policy change and a decrease in taxes

would shift the Aggregate demand (AD) curve to the left

Increased government debt can lead to higher interest rates​ and, as a​ result, crowding out of private investment spending. In terms of borrowing​ (debt-spending), what will offset the effect of crowding out in the long run so that government debt poses less of a problem to the​ economy?

​A. Debt-spending on education. B. ​Debt-spending on highways and ports. C. ​Debt-spending on research and development.All of the above


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