Macro 2
What happens if business expectations improve?
AD shifts right
In the US, monetary policy is controlled by
Federal Reserve
the ___ is vertical at full employment
Long run aggregate supply curve
Which of the following statements regarding discretionary and mandatory spending is correct?
Mandatory spending may act as automatic stabilizing force in the macro economy
which of the following is not correct?
Purchases of capital goods are excluded from GDP.
Aggregate Supply
The Real GDP that firms will produce at varying price levels
discretionary spending
The part of the budget that works its way through the appropriations process of Congress each year and includes national defense, transportation, science, environment, and income security.
which of the following measures is NOT an example of discretionary fiscal policy?
The unemployment compensation program pays out more money as the unemployment rate rises
disposable income is equal to
Y-T
Without government spending, which of the following is true?
Y=C+S
a bond is a
a certificate of indebtedness
A change in ones determinants of aggregate demand will cause the aggregate demand curve to shift. Which of the following will not cause a shift?
a change in the price level
the collapse of home values in 2008 led to ___ in Americans consumption and ___ in their saving rates
a decrease, an increase
the collapse of home values in 2008 led to ___ in Americans saving rates, shifting aggregate demand to the
a decrease, left
economic growth is shown as
a shift to the right in the long- run aggregate supply curve
excess reserves that banks keep
above the legally required amount
In the AD/AS model, the vertical axis is labeled
aggregate price level
in a system with fractional reserve banking
all banks must hold reserves equal to a fraction of their deposits
which of the following will NOT shift the aggregate supply curve to the right?
an increase in minimum wage
economists use the term money to refer to
assets used for transactions
the economy's two most important financial markets are
bonds and stocks
In a 100 percent- reserve banking system, banks
cannot affect the money supply
demand deposits are funds held in
checking accounts
to increase the monetary base, the fed can
conduct open-market purchases
monetary base consists of
currency held by the public, plus reserves held by banks.
the money supply consists of
currency plus demand deposits
If the federal reserve wishes to increase money supply, it should
decrease the discount rate
When the Fed makes an open-market sale, it:
decreases the monetary base (B)
The aggregate demand curve slopes ___ and has ___ on the vertical axis
downward, the price level
When home values collapsed in the period that began in 2008, it reduced many Americans':
household wealth
Which of the following categories is an example of discretionary spending?
hurricane relief funds
The $787 billion stimulus package passed in the United States in 2009 focused more on spending than on taxes primarily because
increased spending leads to a larger increase in GDP than does the same reduction in taxes
a falling aggregate price level ____ demand for a countrys exports and therefore ____ output demanded
increases; increases
__ government spending , __ transfer payments, and __ taxes are all examples of expansionary fiscal policy
increasing, increasing, lowering
Aggregate supply shifts to the left when
input prices rise
discretionary fiscal policy
involves adjusting government spending and tax policies with the express short-run goal of moving the economy toward full employment, expanding economic growth, or controlling inflation
when the fed increases the discount rate, it
is likely to decrease the monetary base (B)
The national economic objectives that the Fed attempts to achieve include all of the following actions except
keeping tax rates low
increased taxes will shift the aggregate demand curve to the ____ and _____ output demanded
left; decrease
in a fractional- reserve banking system, banks create money when they
make loans
a short run aggregate supply curve is positively sloped because
many input prices are slow to change in the short run
the primary economic function of the financial system is to
match one persons saving with another persons investment
Credit Cards
may affect the demand for money
Moneys liquidity refers to the ease with which
money can be converted into goods and services
Transfer payments are
monies paid directly to individuals by the government
the most frequently used tool of monetary policy is
open market operations
short-run aggregate supply curve
positively sloped because some input costs are slow to change
You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?
private saving is positive; public saving is negative
MPC
proportion of additional income that an individual consumes
the aggregate demand curve displays
real GDP demanded at various price levels.
a rising aggregate price level _____ an economy's interest rates and therefore ______ output demanded
reduces; increases
__ government spending , __ transfer payments, and __ taxes are all examples of contractionary fiscal policy
reducing, increasing, raising
decreased interest rates will shift the aggregate demand curve to the _____ and _____ output demanded
right; decrease
increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output
right; increase
to prevent banks from using excess reserves to make loans that would increase the money supply, the Federal Reserve could conduct open market___ and ___ the interest paid on bank reserves
sales; raise
given the lekeishas income exceeds her expenditures, she is best described as a
saver or a supplier of funds
If the government's expenditures exceeded its receipts, it would likely
sell bonds directly to the public
If a pill is discovered that allows people to work twice as fast as they would ordinarily work, then the aggregate supply curve will:
shift to the right
economic growth is shown as
shift to the right of the long-run aggregate supply curve
the aggregate demand curve
shows the amount of real GDP that will be demanded at each possible price level
Are examples of mandatory spending
social security, interest on the national debt, and medicare
Increased government__ leads to a larger increase in GDP when compared to the same reduction in __
spending, taxes
Aggregate supply
the amount of output that is sold at each price level
the long- run aggregate supply curve is vertical because
the economy will gravitate to the position of full employment when all variables are flexible
everything else being the same, if depositors decrease their balances in their checking accounts and increase their currency holdings
the money multiplier decreases
If you hear in the news that the Federal Reserve conducted open-market purchases, then you should expect ______ to increase.
the money supply
Aggregate Demand
the output of goods and services (real GDP) demanded at different price levels
Because wages are slow to change in the short run
the short run aggregate supply curve is positively sloped
Currency equals
the sum of coins and paper money
Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,
their investments are being financed by someone else's savings
in the US, bank reserves consist of
vault cash and deposits at the Federal Reserve
long-run aggregate supply curve
vertical at full employment
all of the following are considered major functions of money except as a
way to display wealth
GDP= C+I+G+(X-M)
when the economy is in eqaullibriam
advances in technology
will most likely increase the economys long run aggregate supply
advances in technology
will most likely increase the long-run aggregate supply
Which of the following is NOT an explicit short run goal of discretionary fiscal policy?
zero unemployment