Macroeconomics Practice Final
Economies where goods and services are traded directly for other goods and services are called ________ economies.
barter
tax cuts on business income increase aggregate demand by increasing
business investment spending
the level of aggregate supply in the long run is not affected by
changes in the price level
which of the following is considered contractionary fiscal policy
congress increases the income tax rate
the federal open market committee consists of the seven members of the ---, the president of the federal reserve bank of new york, and ----
federal reserve's board of governors; four presidents from the other 11 federal reserve banks
the crowding out of private spending by gov spending will be greater the
more sensitive consumption, investment, and net exports are to changes in interest rates
the main tool that the federal reserve uses to conduct monetary policy is
open market operations
the short run aggregate supply curve has a ---- slope bc as prices of ---- rise, prices of ---- rise more slowly
positive; final goods and services; inputs
full employment GDP is also known as
potential GDP
the tax increases necessary to fund future social security and medicare benefit payments would be
large, and could discourage work effort, entrepreneurship and investment, thereby slowing economic growth
Potential GDP refers to the level of
real GDP in the long run
the major assets on a bank's balance sheet are its
reserves, loans, and holdings of securities
If the central bank can act as a lender of last resort during a banking panic, banks can
satisfy customer withdrawal needs and eventually restore the public's faith in the banking system
gov transfer payments include which of the following
social security and medicare programs
before the great depression of the 1930s, the majority of government spending took place at the --- and after the great depression the majority of gov spending took place at the ---
state and local levels; federal level
If whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy?
store of value
which of the following functions of money would be violated if inflation were high
store of value
T or F: expansionary fiscal policy involves increasing gov purchases or increasing taxes
False
T or F: a decrease in disposable income will shift the aggregate demand curve to the left
True
T or F: an appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes
True
a bank will consider a car loan to a customer --- and a customer's checking account to be ----
an asset; a liability
if aggregate demand just increased, which may have caused the increase
an increase in government purchases
the increase in gov spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in gov spending on unemployment insurance payments to workers during an expansion is an example of
automatic stabilizers
bank reserves include
vault cash and deposits with the Federal Reserve.
Suppose you withdraw $500 from your checking account deposit and bury it in a jar in your back yard. If the required reserve ratio is 10 percent, checking account deposits in the banking system as a whole could drop up to a maximum of
$5000
Fiscal policy is determined by
Congress and the President
monetary policy refers to the actions the
Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives.
interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run
aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise
contractionary monetary policy on the part of the fed results in
a decrease in the money supply, an increase in interest rates, and a decrease in GDP
bc of the slope of the aggregate demand curve, we can say that
a decrease int he price level leads to a higher level of real GDP demanded
which of the following would cause the short run aggregate supply curve to shift to the right
a technological advance
what shows the relationship between the price level and quantity of real GDP demanded?
aggregate demand curve
an increase in individual income taxes -- disposable income, which --- consumption spending
decreases decreases
An increase in the interest rates
decreases investment spending on machinery, equipment and factories, consumption spending on durable goods, and net exports.
an increase in gov purchases will increase aggregate demand because
gov expenditures are a component of aggregate demand
If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in:
gov purchases
automatic stabilizers refer to
gov spending and taxes that automatically increase or decrease along with the business cycle
which of the following is an objective of fiscal policy
high rates of economic growth
T or F: One of the monetary policy goals of the federal reserve is price stability
true
deflation will
increase the quantity of real GDP demanded
the largest source of federal gov revenue in 2008 was
individual income taxes
which of the following is not a function of the federal reserve system or the Fed
insuring deposits in the banking system
the invention of the cotton gin ushered in the industrial revolution and began a long period of technological innovation. What did this technological change do to the short run supply curve?
it shifted the short run aggregate supply curve to the right
When the aggregate demand curve and the short-run aggregate supply curve intersect,
the economy is in short run macroeconomic equilibrium
which of the following would be classified as fiscal policy
the federal gov cuts taxes to stimulate the economy
The use of fiscal policy to stabilize the economy is limited because
the legislative process can be slow, which means that it is difficult to make fiscal policy actions ina timely way
If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries,
the long run aggregate supply curve will shift to the left
Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result,
the short run aggregate supply curve will shift to the let as wages increase
which of the following does not reflect the state of the tax system in the U.S today?
the tax laws have become increasingly simplified as private citizens have demanded these changes
the recession of 2007-2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve
this will shift the aggregate demand curve to the left
the largest and fastest growing category of federal gov expenditures is
transfer payments
