Macroeconomics ch 30, 34, 36, and 40

False

1 + MPS = MPC True or false

False

A decline in the real interest rate will shift the investment demand curve to the right. True or false

True

A decrease in the nominal GDP, other things remaining the same, will decrease both the total demand for money and the equilibrium rate of interest in the economy. True or false

Quota

A maximum limit set on the amount of specific good that may be imported into a country over a given period of time is called a

Increase the price in sales of domestic producers

A protective tariff will

Tax

A tariff is a

If inflation rises by one percentage point above its target, then the Fed should raise their targeted interest rate by 1/2 a percentage point

According to the Taylor rule,

The increase in excess reserves in the banking system virtually eliminating the need for banks to borrow in the federal funds market

After the 2008 financial crisis, why did the federal reserve effectively lose its ability to increase the money supply by manipulating the federal funds rate target

Fall

All else equal, when the federal reserve banks engage in a restrictive monetary policy, the prices of government bonds usually

A means of payment

An asset's liquidity refers to its ability to be

7.4%

An inflation of 8% would erode the purchasing power of the dollar by

The multiplier

Art buchwald's article "squaring the economic Circle" is a humorous description of

Federal open market committee

As it relates to federal reserve activities, the acronym FOMC describes the

Is the practice of selling goods in a foreign market at less than cost

As it relates to international trade, dumping

16 billion, and also buy 16 billion if the securities are purchased directly from commercial banks

Assume that there is a 25% reserve ratio and that the federal reserve buys 4 billion worth of government securities. If the securities are purchased from the general public, this action has the potential to increase money supply by a maximum of

"You can lead a horse to water, but you can't make it drink"

Assume the Fed creates excess reserves in the banking system by buying government bonds, the banks do not make more loans because economic conditions are bad. This situation is a problem of

Income levels

Benefits from international trade are based on differences in the following areas, except

False

Bond prices and interest rates are directly or positively related. True or false

The deposits held by banks and thrifts on which checks can be written

Checkable deposits include

1) The board of governors: They supervise and control the money and banking system 2) The 12 federal reserve banks: act as a banker's bank in each of their designated regions; collectively act as the central bank of the United States by setting monetary policy and regulating the private banking system under the direction of the board of governors 3) The federal open market committee: a 12 member group that consists of the seven board of governor members, the president of the New York federal reserve bank, and four other presidents of federal reserve banks; meets regularly to direct the purchase and sale of government securities in the open market

Describe the three major units of the federal reserve system and their functions

Sets policy on the sale and purchase of government bonds by the Fed

Federal open market committee

A liability as viewed by the federal reserve banks

Federal reserve notes in circulation are

The long term appointments provide the board with continuity, experienced membership, and independence from political pressures that could result in inflation

How do long terms for appointments benefit the federal reserve board of governors?

Solvent

If a firm possesses assets whose value exceeds the value of its debts the firm is said to be

Decrease by $75

If disposable income decreases from 1800 to 1500 an MPC equals 0.75, then saving will

Saving more

If households consume less at each level of disposable income, they are

True

If nominal GDP is 2000 billion and the amount of money demanded for transactions purposes is 500 billion, then on average each dollar will be spent about four times a year. True or false

3

If the MPS is only half as large as the MPC the multiplier is

Will shift downward

If the consumption scheduled shifts upward in the shift was not caused by the tax change, the saving schedule

Increase the interest rate and reduce the price level, assuming it is flexible downward

If the economy is operating in the relatively state (upper) portion of its aggregate supply curve, reduction in the money supply will

Investment will take place until I and R are equal

If the real interest rate in the economy is i and the expected rate of return on additional investment is R, then, other things equal,

Is 0.25

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule

Decrease to 0.5%

If there is a 2% unemployment gap and inflation rate is 1%, then according to the Taylor Rule, the Fed should make their targeted interest rate

The APC rises and the APS falls

If there is a decrease in disposable income in an economy, then

false

In 2018, the United States was the largest exporter in the world. True or false

Slope of the consumption schedule is 0.8

In an economy, for every 10 million increase in disposable income, saving increases by 2 million. it can be concluded that the

Each nation must be able to produce at least one good relatively cheaper than the other

In order for mutually beneficial trade to occur between two otherwise isolated nations,

The Fed pursued quantitative easing

In response to the zero lower bound problem,

M1 increases and M2 stays the same

Michelle transfers 4000 from her savings account to her checking account. What effect does this change likely to have on M1 and M2

Commercial banks

Money supply M1 does not include the currency held by

The US, Mexico, and Canada

NAFTA establish a free trade area and eliminated trade barriers between

Escape the complications of barter

One major advantage of money serving as a medium of exchange is that it allows society to

Federal reserve banks

Paper money in the United States is issued by the

Less costly for banks to hold excess reserves

Raising the interest paid on reserves has the effect of making it

false

Subprime mortgage loans are so named because the rates charged are below the prime interest rate. True or false

The subset of the EU that uses a common currency

The Eurozone is

True

The US has a trade surplus in services. True or false

The MPC is constant and the APC declines as income rises

The consumption schedule is such that

An increase in the excess production capacity available in industry

The investment demand curve will shift to the left as a result of

Are appointed for 14 year terms

The members of the federal reserve board

Protect it from political pressure

The reason for the Fed being set up as an independent agency of government is to

Buyers Owe more on their mortgage than the properties are worth

What does it mean when economists say that home buyers are "underwater" on their mortgages

The principle of comparative advantage is the proposition that an individual, region, or nation will benefit if it specializes in producing goods for which its own opportunity cost are lower than the opportunity cost of a trading partner, and then exchanging some of the other products in which it specializes for other desired products produced by others

What is the principle of comparative advantage

1 - MPS

What is the slope of the consumption schedule or consumption line for a given economy

A means of payment

When economists say that money serves as a medium of exchange they mean that it is

Increased and the multiple by which the commercial banking system can lend is increased

When the required reserve ratio is decreased, the excess reserves of banks are

The diversification for stability argument

Which of the following arguments for trade production is based on the premise that a nation should have a wide enough range of domestic industries to be self-sufficient if necessary

Open market operations are done to lower interest rates; quantitative easing is done to increase the quantity of bank reserves

Which of the following is a difference between "quantitative easing" in ordinary open market operations

An increase in the possibility of retaliatory Tariffs

Which of the following is a likely result of imposing tariffs to increase domestic employment

Open market operations

Which of the following is a tool of monetary policy often used by the field for altering the reserves of commercial banks

Wage rates in a nation are largely determined by productivity, not trade tariffs

Which of the following is a valid counter argument against using tariffs to protect high wages from cheap foreign labor

APC + APS = 1

Which of the following is correct

$200,000 balance in the checking account of Main Street trading Corp.

Which of the following is included as part of the M1 money supply

Savings deposits

Which of the following items are included in the money supply M2 but not M1

Quantitative easing refers to the Fed's use of open market operations to buy trillions of dollars worth of medium and longer maturity financial assets

Which of the following statements about quantitative easing is most accurate