Macro Exam 4
60) Largest source of federal government revenues
Individual income taxes
41) time policymakers must wait for economic data to be collected, processed, and reported
Information Lag
55) reward for saving is ____and this variable is placed on the ____axis of the loanable funds market graph
Interest Vertical
35) Price of a bond is equal to
Interest payment / yield
13) The demand curve for loanable funds represents ____ and ____
Investors; downward sloping
64) M2 is ____ in dollar value than M1; it also contains ___assets
Larger Less Liquid
30) Crowding out
Leads to higher interest rates
66) Rising productivity will increase economic growth and raise the average standard of living, shifting the ____ curve to the ____
Long-run aggregate supply; right
39) took $5000 from checking account and put money in savings account at same bank
MI went down by $5000 but M2 was unchanged
20) if reserve requirement is 1% what is the money multiplier
MM = 1/.01 = 100
48) Liquid scale
Most $100 in cash Least Picasso painting
22) Examples of discretionary spending
National defense income security veterans benefits
Decision Lag
Passed by congress
57) The ___is the sum of past ___
Public debt Budget deficits
68) time it takes for policymakers to confirm that the economy is trending in or out of a recession
Recognition Lag
53) Crowding effect can drive up interest rates, which ____ consumer spending on durable goods and ___ business investment
Reduces Reduces
17) Examples of contractionary fiscal policy
Reducing government spending Reducing transfer payments Raising taxes
25) Formula for reserve ratio
Reserves / total deposits
59) government spending increases, aggregate demand curve shifts to the ___ and the multiplier effect is dampened by a ___ in the aggregate price level
Right rise
8) Examples of mandatory spending
Social Security; interest on the national debt; Medicare
61) If Sparrow buries a chest of gold on a deserted island and plans to come back for it later, then the gold is functioning as a
Store of value
28) Government implements a policy reducing rewards earned by savers
Supply of lonable funds shifts left
54) Automatic Stabilizers include
Unemployment compensation benefits Welfare payments Tax revenues
5) Unemployment benefit programs are an example of discretionary fiscal policy
When workers lose their job file for unemployment benefits; so government spending rise during recessions; As economy recovers and people go back to work, spending on unemployment shrinks
4) Disposal income is equal to
Y - T Y = income T = Taxes
44) Laffer curve demonstrates
above some point on the tax rate scale, lowering tax rates increases tax revenues
26) Budget Deficit
amount by which annual government spending exceeds tax revenues
72) Money
anything that is accepted in exchange for other goods and services or for the payment of debt
24) Fed increases supply of money in the market
bond prices will rise interest rates will fal
43) Federal Open Market Committee
composed of the Board of Governors and five other regional Reserve Bank presidents
23) Mandatory spending
comprimises two-thirds of the federal budgest
Informational lag
data not available
38) Successful barter in a primitive economy necessitates
double coincidence of wants
10) leads to higher interest rates
end of a government program that provides taxpayers with additional incentives to invest in their retirement plan
3) Unit of Account
function of money that gives us a yardstick by which we can measure and compare the values of a wide variety of goods and services
33) Liquidity
how quickly, easily, and reliably an asset can be converted into a edium of exchange
Implementation lag
implement law
11) legislators debate for six months on which spending programs to utilize to manipulate the business cycle
implementation lag
7) economy is in recession; to increase demand using discretionary fiscal policy the government can
increase government spending or reduce taxes
42) Open market operations
involve the purchase and sale of government securities
40) Transfer payments
monies paid directly to individuals by the government
67) bank is subject to a reserve requirement of 15%, then it is required to
place 15% of its deposits in the account with its regional Federal Reserve bank or the vault
29) Federal Funds rate
rate at which banks charge each other for overnight
29) Discount Rate
rate at which regional Federal Reserve banks charge dipository institutions for short-term loans
45) expansionary policy pushes output beyond the full employment level of GDP
short-run aggregate supply curve will shift to the left
58) Increased government ___ leads to a larger increase in GDP when compared to the same reduction in
spending taxes
77) Federal Reserve system includes how many regional banks
12
19) if there is a general rise in fear of the financial system
Actual multiplier will rise
1) What are the primary functions of money?
unit of account, medium of exchange, store of value
Recognition Lag
wait until trend in data
56) MI includes
Cash Demand deposits other checkable deposits
6) Tool of Monetary Policy
Changing the discount rate changing reserve requirements open market operations
63) Contractionary fiscal policy is used to
Combat inflation stemming from an overheated economy
21) 12 Federal Reserve banks and their branches do this
Distribute coins and currency Regulate and supervise member banks Serve as a banker for the U.S. Treasury
36) Fiat money
Does not necessarily have any intrinsic value but has been declared by a government to be money
2) The best discretionary fiscal policy option is
Expansionary Fiscal policy that leads to full employment
70) Oversees main tool of monetary policy
Federal Open Market Committee
49) Central bank of the U.S
Federal Reserve System
73) basic goal of the Federal Reserve System
Full employment (maximize employment and minimize unemployment Maintain low and stable inflation
34) Corporate bonds generally have a ___ return on investment than do checking deposits because bonds are ___
Higher Riskier
12) The _____ lag can be expected to last 18 to 24 months
Implementation
47) time required to turn fiscal policy into law to have an impact on economy
Implementation