macro test 3
The price level will decrease.
A SR-AS shock results in a decrease in the unemployment rate below the natural rate of unemployment. Given our model, what else can we expect to happen in the short run? A. Real GDP output will decline. B. The price level will decrease. C. A rise in inflation. D. A movement up/left along the AD curve. E. Both C and D are correct.
the tax rate paid on a worker's next dollar of income.
A marginal tax rate is: A. the tax rate paid on a worker's next dollar of income. B. equal to a worker's income tax bracket. C. the total tax paid divided by the amount of taxable income. D. irrelevant for making decisions about earning extra income. E. applied only to high earners under a progressive income tax system.
an upward movement along the aggregate demand curve.
A rise in the price level that leads to a change in the interest rate. This will cause ____________. A. an upward movement along the aggregate demand curve. B. a downward movement along the aggregate demand curve. C. a rightward shift of the aggregate demand curve. D. a leftward shift of the aggregate demand curve. E. no change
people underestimate inflation.
According to adaptive expectations theory, when inflation accelerates: A. people underestimate inflation. B. people overestimate inflation. C. people correctly estimate inflation. D. people change to rational expectations. E. unemployment must increase.
Increasing the eligible age for S.S.
Considering our class discussion and political motives, which is the last change to Social Security you would likely see? A. Removing the upper limit on income that is taxable for S.S. B. Means testing C. Adjusting the C.O.L.A. calculation D. Increasing the eligible age for S.S.
5;12
Currently, as in right now, there are ___ members of the Board of Governors at the Federal Reserve and there are ____ Regional Federal Reserve Banks. A. 5;10 B. 7;10 C. 5;12 D. 7;12 E. 10; 12
A and C are correct, B is wrong.
In practice, using fiscal policy to influence the economy is more difficult than a simple model would demonstrate because A. precise information about the change needed to tax policy is not perfect. B. the amount of reserves and the impact on the money supply is influenced by how much currency consumers choose to hold. C. there can be a lag between implementing a policy of changing discretionary spending and the impact. D. A and C are correct, B is wrong. E. A, B and C are correct.
an implementation lag
In the U.S. and most developed countries, several governing bodies must approve changes in spending or tax policies. This causes _______between setting fiscal policy and seeing its effects. A. a recognition lag B. an implementation lag C. an impact lag D. a countercyclical lag E. an automatic lag
lowers; raises; lowers
In the short run, contractionary monetary policy _________ real gross domestic product (GDP), _________ unemployment, and __________ the price level. A. raises; lowers; raises B. raises; raises; raises C. lowers; lowers; raises D. lowers; raises; lowers E. raises; lowers; lowers
costs; revenue
Input prices affect the firm's __________, and output prices affect the firm's __________. A. revenue; costs B. costs; costs C. costs; revenue D. revenue; revenue E. decisions in the short run but not in the long run; decisions in the long run but not in the short run
an item to barter.
Money does NOT function as: A. a unit of account. B. a medium of exchange. C. a means to buy goods and services. D. an item to barter. E. a store of value.
a medium of exchange
Money eliminated the need for the double coincidence of wants through its role as: A. fiat money. B. a unit of account. C. a store of value. D. a medium of exchange. E. commodity money.
Corporate income taxes
The 3rd largest source of revenue for the U.S. federal government is A. Personal income taxes B. Corporate income taxes C. Social insurance taxes D. Customs and Tariff taxes E. Estate and Gift taxes
7, ben bernanke
The Board of Governors of the FED "normally" consists of ____ members and was chaired by ____ during the "Great Recession". A. 5; Janet Yellen B. 5; Ben Bernanke C. 7; Alan Greenspan D. 7; Ben Bernanke E. 12; Alan Greenspan
bank failures during the "Great Depression".
The FDIC was created in response to _____ A. bank failures during the "Great Depression". B. repeated nationwide financial crisis especially one in 1907. C. an international debt crisis following World War I. D. the repeal of the first U.S. National Bank charter. E. the "Great Recession" and the need to regulate larger national banking institutions that created a "systemic risk".
M2 would be unchanged.
If I were to give cash to my father for his birthday and he deposited the cash into his online savings account, which of the following changes would take place? A. M1 and M2 would remain unchanged. B. M1 would decrease; M2 would increase. C. M1 and M2 would increase. D. M2 would be unchanged. E. M1 would increase; M2 would decrease.
the price level will fall.
If the current short-run equilibrium level of output is less than full employment output and the price level P1 is below the initial P0, we can then expect that in the long run: A. aggregate demand will decrease. B. aggregate demand will increase. C. the price level will fall. D. the price level will rise. E. long-run aggregate supply will decrease.
money illusion impacting input costs.
If the price level falls but workers are reluctant to accept a pay cut, this is an example of: A. menu cost impacting input costs. B. money illusion impacting input costs. C. a legally binding contract. D. a supply shock. E. an implicit contract.
increases; increases
If the price level falls, then real wealth ________ and the total quantity of aggregate demand __________. A. increases; increases B. increases; decreases C. decreases; decreases D. decreases; increases E. is unaffected; is unaffected
the government will want to conduct contractionary fiscal policy.
If the unemployment rate falls below the natural rate of unemployment (u*): A. the government will want to conduct expansionary fiscal policy. B. the Federal Reserve will want to conduct expansionary monetary policy. C. the economy is in a recession. D. there will be no worries about inflation. E. the government will want to conduct contractionary fiscal policy.
commercial banks make loans.
In a fiat money economy, money is created when: A. money in a savings account is transferred to a checking account. B. more gold is discovered. C. banks make deposits at the Federal Reserve. D. individuals store cash at home instead of depositing it in the bank. E. commercial banks make loans.
Input prices fully adjusting
In our model the SR-AS shifting to an equilibrium that results in the long run full employment output would represent A. Output prices fully adjusting B. A negative supply shock C. Input prices fully adjusting D. A positive supply shock E. Both C and D are correct.
Increase the discount rate.
The FED B.O.G. wants to discourage banks from borrowing directly from the Federal Reserve. What is the most likely action they would take? A. Increase the reserve requirement. B. Increase the federal funds rate. C. Increase the discount rate. D. Increase the corporate tax rate. E. Increase the capital gains tax in savings.
aggregate demand; left
The goal of "contractionary" fiscal policy is to shift the _____ curve to the _____. A. aggregate demand; left B. aggregate demand; right C. short-run aggregate supply; right D. short-run aggregate supply; left E. long-run aggregate supply; left
aggregate demand; left
The goal of contractionary fiscal policy is to shift the _______ curve to the _________. A. aggregate demand; left B. aggregate demand; right C. short-run aggregate supply; right D. short-run aggregate supply; left E. long-run aggregate supply; left
monetary neutrality.
The idea that the money supply does not affect real economic variables is called: A. adaptive expectations theory. B. monetary neutrality. C. the Phillips curve. D. contractionary monetary policy. E. expansionary monetary policy.
mandatory outlays.
The largest portion of the federal budget is dedicated to: A. discretionary spending. B. mandatory outlays. C. interest payments. D. tax collection. E. defense spending.
individual income taxes.
The largest source of tax revenue for the government is: A. individual income taxes. B. corporate income taxes. C. social insurance taxes. D. estate taxes. E. excise taxes.
A change in the price level from the interest rate effect
____ would cause a movement along the AD function would A. A change in the price level from the interest rate effect B. A change in expected income for all consumers C. A change in the level of real income of foreign nations D. A change in the exchange rate between countries E. Both C and D are correct.
The price level falls.
After quitting on his team, Steve Spurrier is named the new FED Chairman. He convinces the FOMC to vote to "engage in open market selling" of $200 million of bonds and securities each day for the next 30 days even though the market is currently at a long run equilibrium. What is likely the result of this action in the short run? A. AD shifts to the right. B. LR-AS shifts to the left. C. Structural unemployment increases. D. The price level falls. E. SR-AS shifts to the right.
consumers, firms, the government, and foreigners that buy goods and services produced in the United States.
Aggregate demand is determined by adding up the spending of: A. domestic consumers who buy goods and services produced in the United States. B. domestic consumers and firms that buy goods and services produced in the United States. C. domestic and foreign consumers who buy goods and services produced in the United States. D. domestic and foreign consumers and firms that buy goods and services produced in the United States. E. consumers, firms, the government, and foreigners that buy goods and services produced in the United States.
long-run aggregate supply will fall.
All else being equal, as the population ages and many people leave the labor force: A. the unemployment rate will rise. B. the price level will fall. C. long-run aggregate supply will fall. D. long-run aggregate supply will be unaffected. E. aggregate demand must rise.
workers with "sticky wages" are paying more for goods and services.
An increase in aggregate demand is harmful because: A. workers with "sticky wages" are paying more for goods and services. B. firms have sticky input prices and earn less profit. C. unemployment rises. D. output has risen above the full employment level. E. wages will have to fall in the long run.
a reduction in expected future prices.
An increase in short-run aggregate supply could be the result of (caused by): A. an increase in the general price level. B. a negative supply shock. C. an increase in the price of oil. D. an increase in consumption spending. E. a reduction in expected future prices.
an increase in real wealth and a movement along the aggregate demand curve.
An increase in short-run aggregate supply immediately leads to: A. an increase in real wealth and a shift of the aggregate demand curve. B. an increase in real wealth and a movement along the aggregate demand curve. C. a shift of the aggregate demand curve caused by menu costs. D. a shift of the aggregate demand curve caused by money illusion. E. an increase in money illusion and a movement along the aggregate demand curve.
an upward movement along the short-run aggregate supply curve as firms increase output.
An increase in the general price level will lead to: A. a rightward shift of the short-run aggregate supply curve as firms increase output. B. a downward movement along the short-run aggregate supply curve as firms decrease output. C. a leftward shift of the short-run aggregate supply curve as firms decrease output. D. an upward movement along the short-run aggregate supply curve as firms increase output. E. no change in output because input prices are sticky.
a multiplier effect.
An initial increase in government spending of $100 billion can create more than $100 billion impact through what economists call: A. a multiplier effect. B. an enhancement effect. C. an interest rate effect. D. an aggregate supply effect. E. a wealth effect.
remain unchanged; decrease
Assume we start at the long run equilibrium. Suppose the government permanently reduces spending in an effort to reduce the budget deficit. In the new long-run equilibrium, output will ______ and the price level will ________. A. decrease; decrease B. remain unchanged; decrease C. remain unchanged; increase D. decrease; remain unchanged E. increase; decrease
Although there is a short-run incentive to increase the money supply, these effects wear off in the long run as prices adjust and then drive down the value of money.
Changes in the quantity of money lead to real changes in the economy. If this is the case, why would the central bank ever stop increasing the money supply? A. Although there is a short-run incentive to increase the money supply, these effects wear off in the long run as prices adjust and then drive up the value of money. B. The government has rules in place on the maximum amount the money supply can be increased in a given fiscal year. C. Although there is a short-run incentive to increase the money supply, these effects wear off in the long run as prices adjust and then drive down the value of money. D. Increasing the money supply is not a politically popular action and may lead to leaders of the central bank not getting reelected. E. The short-run benefits are outweighed by the short-run costs of increases in the money supply.
the Department of Education.
Discretionary government spending includes payments made for: A. children's health insurance program. B. deposit insurance payments. C. unemployment compensation. D. the Department of Education. E. pension payments
decreases because people start withdrawing their money from banks.
During a financial crisis hit hard by bank failures, the money supply: A. decreases because people start putting money into savings accounts. B. increases because people start putting money into savings accounts. C. increases because people start withdrawing their money from banks. D. decreases because people start withdrawing their money from banks. E. increases because people spend more instead of saving more.
outlays decrease and tax revenue increases.
During economic expansions: A. outlays increase and tax revenue falls. B. outlays increase and tax revenue increases. C. outlays decrease and tax revenue increases. D. outlays decrease and tax revenue falls. E. outlays and tax revenue stay the same.
when the current unemployment rate is above the natural rate of unemployment
During which of the following situations would you expect expansionary fiscal policy to be implemented? A. when current output is above full-employment output B. when the economy is expanding at a rapid pace C. when inflation is at 10% per year D. when the current unemployment rate is below the natural rate of unemployment E. when the current unemployment rate is above the natural rate of unemployment
lowers interest rates, causing aggregate demand to shift to the right.
Expansionary monetary policy: A. lowers interest rates, causing aggregate demand to shift to the right. B. lowers interest rates, causing aggregate demand to shift to the left. C. raises interest rates, causing aggregate demand to shift to the right. D. raises interest rates, causing aggregate demand to shift to the left. E. lowers interest rates, causing short-run aggregate supply to shift to the right.
a decrease in real gross domestic product (GDP).
Holding all else constant, in the short run, a decrease in the money supply can cause: A. a decrease in unemployment. B. a high rate of inflation. C. an increase in the price level. D. a decrease in real gross domestic product (GDP).
The price level would increase because AD decreases.
On the island country of Jurassitonia they rely heavily on dinosaur tourism. At the current moment they are at full employment output with a steady price level. Suppose the dinosaurs get loose damaging everything they get near and eating people all over the island. What outcome would NOT be possible as a result? A. The price level would increase because AD decreases. B. The LR-AS function shifts left. C. The new natural rate of unemployment decreases. D. The SR-AS would shift left. E. Output would decrease.
overall, the value of houses will continue to rise.
One of the main assumptions before the "Great Recession" that led to the financial crisis was A. the federal government would use increased tax revenues to pay down the national debt. B. overall, the value of houses will continue to rise. C. the U.S. would see larger increases in the growth of long run output in the coming decade. D. the interest return on treasury securities would continue to rise. E. Bill Clinton would make everything all right despite not being president.
georgia
Per class discussion, we all know which state has the most "non-payers" of federal income taxes, but the state second on that list is ______. A. Mississippi B. Florida C. Georgia D. Alabama E. South Carolina
During the "Great Depression" many argue the FED made conditions worse by allowing the money supply to decrease.
Per our class discussions, which of the following statements is correct? A. During the "Great Depression" many argue the FED made conditions worse by allowing the money supply to decrease. B. The FED reduced the amount of mortgage-backed securities it purchased to stabilize the housing market, during the "Great Recession". C. A decline in housing prices during the "Great Recession" resulted in aggregate demand to increase. D. Quantitative easing (QE), was FED policy in place just before the beginning of the "Great Recession" that is widely considered a cause of the economic downturn. E. The "Great Depression" is the only time in our history that the FDIC exhausted all of its funds that helped keep banks from failing.
The FED bought large quantities of mortgage-backed securities.
Per our discussion and your readings, what was a major action the FED took for the first time during the financial crisis of 2008? A. The FED forced insurance giant AIG (nonbank) into a structured bankruptcy, sold its assets and closed it by 2010. B. The FED bought large quantities of mortgage-backed securities. C. The FED took over and ran a failed national bank for a calendar year. D. Both A and B are correct. E. Both A and C are correct.
0
Recall the class video. When Bill and his wife Audrey walked in to Heritage Bank with his empty briefcase after the FDIC had just seized the bank, how much cash did he walk out with? A. $ 0 B. $ 50,000 C. $ 100,000 D. $ 200,000 E. $ 300,000
Roughly half of the U.S. population pays less than 5% of total income tax revenue collected.
Related to fiscal matters, which of the following is true? A. There has not been a fiscal surplus since 1950. B. Spending on the military is 3rd largest mandatory spending category. C. Roughly half of the U.S. population pays less than 5% of total income tax revenue collected. D. The state with the largest percent of non-tax payers is Alaska. E. The U.S. has a regressive marginal tax rate.
Student Loans
Since the end of the financial crisis ('08) the delinquency rate (not paying the bill) has declined on the following except _____. A. Credit cards B. Car Loans C. Mortgages D. Student Loans E. Home equity credit lines
Both B and C are correct
Spending on ________ is considered _______ spending by the U.S. government. A. Social Security; discretionary B. Defense; discretionary C. Medicaid; mandatory D. Education; mandatory E. Both B and C are correct
the LR-AS and SR-AS to shift right.
Starting at our initial equilibrium, suppose the level of education and skill set of the population increases. We can expect A. only the SR-AS to shift right. B. the LR-AS and SR-AS to shift right. C. that natural rate of unemployment must decrease. D. the price level will increase E. Both C and D are correct.
government spending and taxes to affect the production side of the economy.
Supply-side fiscal policy involves the use of: A. government spending and taxes to affect the consumption side of the economy. B. government spending and taxes to affect the production side of the economy. C. government spending and taxes to affect the net exports side of the economy. D. monetary policy to supplement traditional fiscal policy. E. government spending and taxes to affect the aggregate demand curve.
The price level will rise.
Suppose Kris is appointed the new chairman of the FED and assume the economy is currently at its long run equilibrium output. Kris with the advice of his dog, Taco, (and ignoring all economic data in his decision) convinces the FOMC to buy 150 million dollars of T-Bills each day for 60 days. In the short run, which is likely to occur relative to our initial equilibrium? A. The SRAS curve shifts right. B. Output decreases C. The price level will rise. D. The reported unemployment rate will rise. E. Both B and D are likely to occur.
decrease in total output from a shift of the AD curve.
Suppose changes in international markets result in the value of the dollar (exchange rate) increasing relative to other currencies. You would expect in the U.S. a(n) _____ A. increase in total output from a movement along the AD curve. B. decrease in total output from a movement along the AD curve. C. increase in total output from a shift of the AD curve. D. decrease in total output from a shift of the AD curve. E. increase in the LR-AS function to the right
decrease; decrease
Suppose intense and repeated storms bringing large hail and tornadoes hit the "Plains States". This reduces farm output by 25%. In the short run, this will _____ output and _____ employment. A. decrease; decrease B. decrease; increase C. decrease; have no effect on D. have no effect on; have no effect on E. increase; increase
decrease; decrease
Suppose the European Union (EU) falls into recession. In the short run, output in the U.S. will ______ and the price level will ______. A. remain unaffected; remain unaffected B. decrease; remain unaffected C. increase; remain unaffected D. increase; increase E. decrease; decrease
fiscal surplus and decreased the debt.
Suppose the U.S. government spends $4 Trillion and astonishingly brings in $4.1 Trillion in total revenue for the fiscal year of 2016. Given what we know about current circumstances related to the U.S. government, that means the U.S. has a A. fiscal deficit and decreased the debt. B. fiscal deficit but increased the debt. C. fiscal surplus and decreased the debt. D. fiscal surplus but increased the debt.
Interest rate increases, output decreases
Suppose the economy of the country of "Uga-land" starts in long-run equilibrium. If the central bank decides to raise the required reserve ratio, what will be the short-run effects on the market interest rate and the output (Q)? (Assume banks always want to loan out as much as possible.) A. Interest rate increases, output increases B. Interest rate increases, output decreases C. Interest rate decreases, output decreases D. Interest rate decreases, output increases E. Interest rate doesn't change, output doesn't change
M1 would decrease and the C.D. is accounted for in M2.
Suppose you have $500 in cash. You then go to your bank and buy a "1 year C.D." with that cash. Which of the following statements is correct? A. M1 would decrease and the C.D. is accounted for in M2. B. M1 would decrease and the C.D. is accounted for in M1 and M2. C. M2 would decrease and the C.D. is accounted for in M1. D. M1 would remain the same because the C.D. is accounted for in M1.
M1 and M2 remain constant.
Suppose you take $500 in cash and deposit it into your checking account. Which of the following is true? A. M1 and M2 increase. B. M1 and M2 decrease. C. M1 increases and M2 decreases. D. M1 decreases and M2 increases. E. M1 and M2 remain constant.
Janet Yellen
The Federal Reserve Board of Governor Chairman that is currently in the position is ______. A. Ben Bernanke B. Paul Volcker C. Janet Yellen D. Tim Giethner E. Shelia Bair
inflation and unemployment
The Phillips curve shows the relationship between A. government spending and unemployment B. the size of the debt and mandatory spending C. inflation and real GDP output D. inflation and unemployment E. taxes and real GDP output
spends more on mandatory spending than it does on discretionary spending.
The U.S. government A. spends more on defense (military) than the total amount it spends on discretionary spending. B. has raised the eligible retirement age to receive Social Security benefits to 68 within the past 10 years. C. spends more on debt interest than it does on discretionary spending. D. spends more on mandatory spending than it does on discretionary spending.
increased spending on entitlement programs.
The federal budget deficit has grown so quickly in the past 5-10 years because of: A. increased tax revenue. B. increased spending on entitlement programs. C. lower income tax rates on the top 1% of households. D. economic expansion. E. higher interest payments on current government debt.
vertical because full employment output is independent of the price level.
The long-run aggregate supply curve is: A. vertical because full employment output is independent of the price level. B. upward sloping because the economy grows over time. C. horizontal because full employment output is independent of the price level. D. upward sloping because as the price level rises, firms will increase output. E. downward sloping because rising prices reduce real wealth and spending.
will likely shift left if a country experiences an extended period of uncertainty and unrest in its political and legal system.
The long-run aggregate-supply curve _____. A. is vertical because full employment output is directly impacted by the price level. B. is upward sloping because increases in productivity economy grows over time. C. will likely shift left if a country experiences an extended period of uncertainty and unrest in its political and legal system. D. shifting right will necessarily result in a lower "natural rate of unemployment". E. downward sloping because rising prices reduce real wealth and spending.
increase aggregate demand.
The main goal of "expansionary" monetary policy is to A. increase long-run aggregate supply. B. decrease long-run aggregate supply. C. increase aggregate demand. D. decrease short-run aggregate supply. E. Increase short-run aggregate supply.
A, B and C are correct.
The use of money in an economy provides A. a medium of exchange. B. a store of value. C. a unit of account. D. A and B are correct, C is wrong. E. A, B and C are correct.
the tax rate.
The x axis for the laffer curve represents: A. the tax revenue. B. the tax rate. C. real gross domestic product (GDP). D. the price level. E. the inflation rate.
A and B would be considered as potential options.
There is a negative shock to the economy impacting AD. To reduce the impact, which fiscal policy would likely be considered? A. A new fiscal policy that increased government deficits. B. Lower the marginal tax rates. C. The FED buying more securities in open market operations. D. A and B would be considered as potential options. E. B and C would be considered as potential options.
None of these assumptions were true during the crisis.
Thinking about the video "The Crisis of Credit Visualized," which of these assumptions about the housing market was TRUE throughout the crisis? A. Housing prices will keep going up on average. B. When housing prices fall in one area, this doesn't concern housing prices in another area. C. Mortgages are a safe investment because they are only issued to borrowers who demonstrate the ability to repay. D. It is in the best interest of homeowners to make their mortgage payment so long as they can afford it. E. None of these assumptions were true during the crisis.
conduct an open market sale of U.S. Treasury securities; decrease
To decrease the money supply, the Federal Reserve could ______ which results in a(n) ______ in bank reserves? A. conduct an open market sale of U.S. Treasury securities; increase B. conduct an open market purchase of U.S. Treasury securities; increase C. conduct an open market sale of U.S. Treasury securities; decrease D. conduct an open market purchase of U.S. Treasury securities; decrease
increase the discount rate
To decrease the money supply, the Federal Reserve could do which of the following? A. increase the discount rate B. decrease the required reserve ratio C. forbid the reselling of U.S. Treasury securities D. encourage banks to lend money to borrowers E. conduct an open market purchase of U.S. Treasury securities
is backed only by the reputation and stability of the U.S. government.
U.S. currency is considered FIAT money which means it A. is backed only by the reputation and stability of the U.S. government. B. can be exchanged for an equivalent value in gold upon request. C. can be exchanged for a small Italian car. D. is backed by Bill Clinton because FIAT is Latin for "awesome".
medium of exchange
What function of money is highlighted when I pay for my cell phone bill with cash? A. fiat money B. medium of exchange C. unit of account D. store of value E. commodity money
Reserves increase and deposits increase by the same amount as the deposit.
When I decide to deposit $100 in cash into my bank savings account, how would this be reflected on the bank's balance sheet? A. Reserves increase and deposits increase by the same amount as the deposit. B. Reserves decrease and deposits decrease by the same amount as the deposit. C. This activity would not be recorded on a bank's balance sheet. D. Reserves increase and deposits decrease by the same amount as the deposit. E. Reserves decrease and deposits increase by the same amount as the deposit.
there is upward pressure on the price level and the government may want to conduct contractionary fiscal policy.
When aggregate demand is high enough to drive unemployment below the natural rate: A. there is downward pressure on the price level and the government may want to conduct contractionary fiscal policy. B. the economy is slipping into a recession and the government may want to conduct expansionary fiscal policy. C. there is upward pressure on the price level and the government may want to conduct contractionary fiscal policy. D. there is upward pressure on the price level and the government may want to conduct expansionary fiscal policy. E. there is downward pressure on the price level and the government may want to conduct expansionary fiscal policy.
monetary policy is much less likely to restore the economy to its pre-recession conditions.
When both long-run and short-run aggregate supply shift leftward: A. monetary policy is more likely to restore the economy to its pre-recession conditions. B. inflation is not a concern. C. the natural rate of unemployment decreases. D. monetary policy can have no effect on the economy even in the short run. E. monetary policy is much less likely to restore the economy to its pre-recession conditions.
passive monetary policy.
When central banks purposefully choose to only stabilize money and price levels through monetary policy, it is known as _____. A. active monetary policy. B. expansionary monetary policy. C. contractionary monetary policy. D. adaptive monetary policy. E. passive monetary policy.
The government didn't help the banks, causing the money supply to decrease.
When many banks failed during the Great Depression, it caused aggregate demand to decrease. Why? A. Consumers responded by decreasing their rate of savings and increasing spending. B. The government didn't help the banks, causing the money supply to decrease. C. Expected income increased, causing an increase in investment. D. It led to very high rates of inflation, which eroded household spending. E. It caused a rapid decline in exports to other countries.
Sell the bank's assets and accounts through a bid process to another bank.
When the FDIC takes over a bank in financial trouble, what was the most common method to protect its depositors? A. Close the bank and pay off the insured deposits up to $250,000. B. Close the bank and move the insured deposits to a Federal Reserve Bank. C. Continue to operate the bank under FDIC management. D. Sell the bank's assets and accounts through a bid process to another bank. E. Provide discount loans to the bank until depositors move their accounts.
into the loanable funds market.
When the Fed buys bonds from financial institutions, new money moves directly: A. out of the loanable funds market. B. into the hands of consumers. C. into the loanable funds market. D. out of the hands of consumers. E. into short-run aggregate supply.
expansionary fiscal policy.
When the government increases spending or decreases taxes to stimulate the economy toward expansion, the government is conducting: A. expansionary monetary policy. B. expansionary fiscal policy. C. contractionary monetary policy D. contractionary fiscal policy. E. neither monetary policy nor fiscal policy.
demand and aggregate supply will not shift.
When the price level falls consumers experience a "wealth effect", so U.S. aggregate _____. A. demand will shift to the right. B. short-run supply will shift to the right. C. demand will shift to the left. D. short-run supply will shift to the left. E. demand and aggregate supply will not shift.
Repair and upkeep of nuclear submarines
Which of the following is considered discretionary spending for the U.S. government. A. S.N.A.P. and W.I.C. B. Medicaid C. Unemployment Benefits D. Repair and upkeep of nuclear submarines E. Interest payments on national debt
Banks are able to create money when excess reserves are lent to individuals who need to borrow money.
Which of the following is true about banks in a fractional reserve banking system? A. Banks are able to create money when excess reserves are lent to individuals who need to borrow money. B. Banks can lend all of the deposits that are received. C. Banks must purchase gold that equals the value of the deposits received. D. Banks must deposit all cash from depositors with the Federal Reserve. E. Banks have to deposit all cash from depositors in their own bank vault.
The FED failed to support struggling banks and "bank runs" resulted in closures of many financially sound banks.
Which of the following is true regarding the "Great Depression"? A. Structural and Frictional unemployment increased dramatically while Cyclical Unemployment remained constant in the short run. B. It is argued the FED increased the money supply too an excessive amount causing destabilizing inflation. C. The FED failed to support struggling banks and "bank runs" resulted in closures of many financially sound banks. D. Both A and B are correct. E. A, B and C are correct.
Greece rarely, if ever, collects tax revenue equal to the total tax "bill" for the citizens.
Which of the following is true regarding the (EU) European Financial Crisis (recall the video from class). A. Greece rarely, if ever, collects tax revenue equal to the total tax "bill" for the citizens. B. The problem can be traced back to a single fiscal policy and countries having separate monetary policy. C. Portugal was the 3rd largest economy and when they defaulted, it caused several European banks to go bankrupt. D. The halt to lending by European banks was caused by an oil market crisis in the Middle East. E. Greece presented a strict "austerity" program to secure loans from the German government.
Following the Great Recession, the FED had 3 rounds of purchases of "mortgage-backed securities"
Which of the following statements best describes monetary policy during the Great Recession? A. During the wake of the Great Recession, there were significant "contractionary" monetary policy interventions. B. Following the Great Recession, the FED had 3 rounds of purchases of "mortgage-backed securities" C. During the wake of the Great Recession, there was a lack of monetary policy interventions. D. Monetary policy during the Great Recession was completely unexpected. E. Monetary policy during the Great Recession had no impact in the short run.
Expansionary monetary policy can decrease the unemployment rate in the short run but has no effect on the unemployment rate in the long run.
Which of the following statements is true about monetary policy and the unemployment rate? A. Expansionary monetary policy can decrease the unemployment rate in the short run and in the long run. B. Expansionary monetary policy has no effect on the unemployment rate in the short run or in the long run. C. Contractionary monetary policy can decrease the unemployment rate in the short run but has no effect on the unemployment rate in the long run. D. Contractionary monetary policy has no effect on the unemployment rate in the short run or in the long run. E. Expansionary monetary policy can decrease the unemployment rate in the short run but has no effect on the unemployment rate in the long run.
Stock market values increase by 20%.
Which of the following would shift aggregate demand to the right? A. College graduates are having a difficult time finding jobs. B. There is a decline in consumer confidence. C. Stock market values increase by 20%. D. A fall in the price level increases the value of real wealth. E. The value of the dollar increases.
The social security program was passed in 1935.
Which statement is true? A. Only 20% of U.S. households paid any federal income tax. B. The marginal tax rate system in the U.S. is considered "regressive". C. The last year the U.S. ran a budget "surplus" was 2008. D. Social insurance taxes are used to pay for discretionary spending programs such as Social Security and Medicare. E. The social security program was passed in 1935.
The number of retirees is increasing.
Why do Social Security and Medicare pose problems for the federal government budget? A. The number of retirees is increasing. B. The worker-to-retiree ratio is increasing. C. Life expectancy is decreasing. D. Social insurance taxes cannot legally be raised any further. E. Both A and D are correct.
Life expectancy of retirees is increasing.
Why do Social Security and Medicare pose problems for the federal government budget? A. The worker-to-retiree ratio is increasing. B. Payroll taxes are capped and cannot be raised. C. The number of retirees is decreasing. D. The number of sick people is rising too quickly. E. Life expectancy of retirees is increasing.
Wealthy citizens have much more taxable income in higher tax brackets than poor citizens.
Why do wealthy citizens contribute much more tax revenues to the government than poor citizens? A. Wealthy citizens consume more government services, so they are taxed at a higher rate. B. Wealthy citizens have a much lower average tax rate than poor citizens. C. Wealthy citizens work more hours per week than poor citizens. D. Wealthy citizens have much more taxable income in higher tax brackets than poor citizens. E. Wealthy citizens do not contribute more tax revenues to the government than poor citizens.
It could take a long time for prices to adjust by market forces alone.
Why would a government want to use expansionary fiscal policy to help stimulate aggregate demand if, in the long run, we would expect prices to adjust and the economy to return to its long-run equilibrium on its own? A. Expansionary fiscal policy always works in stimulating aggregate demand. B. It could take a long time for prices to adjust by market forces alone. C. Expansionary fiscal policy has no adverse effects on the economy. D. When prices adjust during a recession, we see increases in inflation. E. Expansionary fiscal policy is easy to get approved by Congress and the president.
Someone who lent money out at a fixed interest rate
___________would be hurt by unexpected inflation. A. Someone who lent money out at a fixed interest rate B. A firm that hired a worker on a two-year wage contract C. Someone who borrowed money at a fixed interest rate D. A worker whose wage increases with inflation E. A firm that purchased inputs with a two-year contract
