Macroeconomics Fina

A restrictive monetary policy is designed to shift the

AD curve leftward

The following are important problems associated with the public debt, except

Government borrowing to finance the debt may lead to too much private investment

Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that

Help offset changes in GDP

A decrease in government spending and a cut in taxes would be a pair of fiscal policies that reinforce each other

False

A decrease in taxes is one way to pursue a contractionary fiscal policy because it will make government revenues contract.

False

A restrictive monetary policy may be frustrated if the investment-demand curve shifts to the left

False

Demand-pull inflation can be restrained by increasing government spending and reducing taxes

False

The asset demand for money varies inversely with the nominal GDP

False

The goal of expansionary fiscal policy is to reign in inflation

False

A tax reduction of a specific amount will be more expansionary the

larger the economy's MPC is

A contractionary fiscal policy is shown as a

leftward shift in the economy's AD curve

Monetary policy is expected to have its greatest impact on

Ig

The goal of expansionary fiscal policy is to increase

Real GDP

A newspaper headline reads: "Fed Raises Discount Rate for Third Time This Year." this headline indicates that the Federal Reserve is most likely trying to

Reduce inflationary pressures in the economy

The two reasons why bankruptcy is a false concern about the public debt are

Refinancing and taxation

Built-in stability is exemplified by the fact that with a progressive tax system, net tax revenues decrease when GDP decreases

True

If the government wants to reduce unemployment using fiscal policy, it may do so by increasing government spending

True

Lowering the reserve ratio

Turns required reserves into excess reserves

Federal Reserve Notes in circulation are

a liability as viewed by the Federal Reserve Banks

A wealthy executive is holding money, waiting for a good time to invest in the stock market. This action would be an example of the

asset demand for money

Discretionary fiscal policy refers to

intentional changes in taxes and government expenditures made by Congress to stabilize the economy

The intent of contractionary fiscal policy is to

decrease AD

Assume the economy is operating at less than full employment. An expansionary monetary policy will cause interest rates to _____, which will ______ investment spending

decrease, increase

Due to automatic stabilizers, when the nation's total income rises, government transfer spending

decreases and tax revenues increase

The crowding-out effect suggests that

increases in government spending may reduce private investment

A budget surplus means that

government revenues are greater than expenditures in a given year

Interest paid on reserves held at the Fed

incentivizes financial institutions to hold more reserves and reduce risky lending

An increase in nominal GDP will

increase the transactions demand and the total demand for money

Crowding out is a decrease in private investment caused by

increased borrowing by the government

Expansionary fiscal policy moves a point

rightward on a graph

As the economy declines into recession, the collection of personal income tax revenue automatically falls. This illustrates how a progressive income-tax system

serves as an automatic stabilizer for the economy

A specific reduction in government spending will dampen demand-pull inflation by a greater amount the

smaller the economy's MPS

A television report states: "The Federal Reserve will lower the discount rate for the fourth time this year." this report indicates that the Federal Reserve is most likely trying to

stimulate the economy

If severe demand-pull inflation was occurring in the economy, proper government policies would involve a government

surplus, the sale of securities in the open market, a higher discount rate, and high reserve requirements.