ACC Macroeconomics
The economy is at point A when the money wage rate and the price level both fall by 10%. Firms will be willing to supply output equal to GRAPH: LAS vertical at xvalue 13. SAS1 equals LAS at (13,120); SAS0 equals LAS at (13,110); SAS2 equals LAS at (13,100). Point A is at (13,110).
$13 tril.
the expenditure multiplier equals
1 / (1-slope of AE curve)
required reserves ratio =
= (required reserves)/ (deposits)
velocity of circulation = V=
= [ (price level)(real GDP) ] / (quantity of money) = PY/M
excess reserves =
= [reserves]-[ (deposits)(desired reserve ratio) ]
no taxes/imports/exports. total level of expenditure =
= consumption + investment + government
suppose that the economy currently is at point A. if the inflation rate rises and this rise is NOT expected by the public, the economy moves to a point such as point GRAPH: x-unemployment rate y-inflation rate; LRPC vertical at x=6; SRPC1 below SRPC2 both have curve shape like x&y axis are asymptotes. on SRPC1- point B (4,6) point A (6,4) point E (10,2); on SRPC2 point C (6,6) point D (4, 8)
B
suppose that the economy is at point A when the quantity of money increases. in the short runt he economy will move to point ____. GRAPH: LAS on 13 (xvalue); AD0 below AD1 both negative slopes; SAS0 below SAS1 both positive slopes; Point A @ (13,100) Point B @ (15,110) Point C @ (13,120) Point D @ (11,110)
B.
suppose that the economy is at point A when foreign countries begin an expansion and buy more US made goods. int he short run, this change creates a movement at point _____ and an eventual increase in _________. GRAPH: LAS on 13 (xvalue); AD0 below AD1 both negative slopes; SAS0 below SAS1 both positive slopes; Point A @ (13,100) Point B @ (15,110) Point C @ (13,120) Point D @ (11,110)
B. money wage rates.
the federal reserve system
Both answers A and B are correct: regulates the nations financial institutions; conducts the nations monetary policy
suppose that the economy is currently at point A. if the inflation rate falls and this fall is unanticipated by the public, the economy moves to a point such as point GRAPH: x-unemployment rate y-inflation rate; LRPC vertical at x=6; SRPC1 below SRPC2 both have curve shape like x&y axis are asymptotes. on SRPC1- point B (4,6) point A (6,4) point E (10,2); on SRPC2 point C (6,6) point D (4, 8)
E.
Which of the following will happen if the Fed buys $x securities from bank?
Fed, as payment, increases bank's deposit account with the Fed by $x
in the short run an increase in government expenditure will: I. shift the aggregate demand curve rightward II. increase real GDP III. increase the government expenditure multiplier IV. increase the tax multiplier
I and II shift the aggregate demand curve rightward increase real GDP
Long run equilibrium
LAS intersects with AD
graph that corresponds to a destruction of part of the nations capital stock
LAS vertical, SAS has positive slope. LAS0 moves left to LAS1, SAS0 moves left to SAS1
graph that corresponds to an increase in the money wage rate
LAS vertical, SAS has positive slope. SAS0 moves left to SAS1
M2 includes
M1(currency and travelers checks + checking deposits) + savings deposites + time deposits + money market mutual funds and other deposits
Which of the following is true
MPS + MPC = 1
Equation of exchange
PY=VM PY=Nominal GDP=VM
if demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the
SAS curve shifts leftward
as the economy adjust toward equilibrium GRAPH: AD and SAS make X. LAS is vertical to the left of the short run equilibrium. the lines create a triangle to the left of the short run equilibrium
SAS curve will shift leftward
Which of the following institutions is NOT a depository institution? US treasury, commercial bank, money market mutual fund, thrift institution such as a savings and loan association
US Treasury
on the Fed's balance sheet assets include
US government securities and loans to depository institutions
A money market fund is
a depository institution that sells shares and buys securities such as US Treasury bills.
along the long run Phillips curve,
actual inflation is equal to expected inflation
at equilibrium expenditure
aggregate planned expenditure equals real GDP
The definition of M2 includes
all of the above: M1, savings deposits, time deposits
in the graph: the structural deficit equals zero, any surpluses are cyclical surpluses, any deficits are cyclical deficits, all the above answers are correct GRAPH: x-Real GDP y-expenditures, tax revenues, and budget balance; Line Tax Revenues has positive slope w/ points at (11,2.1) (13,2.2) (15, 2.3); Line Outlays has negative slope w/ points (11,2.3) (13,2.2) (15,2.1); Line Potential GDP is vertical at x=13 w/ mutual point (13,2.2)
all the above answers are correct. structural deficit equals zero any surpluses are cyclical surpluses any deficits are cyclical deficits
which branches of the government play a role in the enacting of the federal budget? I. the president II. the house of representatives II. the senate
all three I. the president II. the house of representatives III. the senate
which of the following shifts the aggregate demand curve rightward?
and increase in the quantity of money
a fall in income that results in a decrease in tax revenues is an example of
automatic fiscal policy
a graph shows tax revenues and government expenditures in the economy of Meadow Lake. Potential GDP is $13 trillion. if real GDP is $13 trillion, then the government has a ___________.
balanced budget
the majority of money is created when
banks make loans
the keynesian model of aggregate expenditure assumes that
both individual firms' prices and the price level are fixed
reserves are
cash in a banks vault plus its deposits at Federal Reserve banks
what is the marginal propensity to consume? MPC=
change in consumption expenditure divided by the change in disposal income = △C / △ YD
marginal propensitiy to save equals the
change in savings resulting from a one dollar change in disposable income
if the government has a balanced budget, the total amount of government debt is
constant
disposable income is divided into
consumption and savings
the AD curve shows the sum of
consumption expemditure, investment, government expenditures on goods and services, and net exports
AD curve shows sum of
consumption expenditure, investment, government expenditures on goods and services, and net exports
all of the following are part of fiscal policy EXCEPT: setting tax rates, setting government spending, choosing the size of government deficit, controlling the money supply
controlling the money supply
a rise in the real interest rate
creates a movement upward along the demand for loanable funds curve
in the United States today, money consists of
currency and deposits at banks
M1 includes
currency and travelers checks + checking deposits
if the economy's capital stock decreases over time..
depreciation exceeds gross investment
federal reserve policy tools include all of the following EXCEPT: desired reserve ratios, required reserve ratios, discount rate, open market operations?
desired reserve ratios
savings is negative when
disposable income is less than consumption expenditure
which of the following institutions is NOT part of the structure of the federal reserve system? federal open market committee, federal reserve banks, board of governors, federal government
federal government
Which of the following is NOT an asset of the federal reserve? federal reserve notes, government securities, loans to depository institutions, none of the above b/c they are all assets of the federal reserve
federal reserve notes
A rise in the price level changes aggregate demand because
firms increase their investment when prices are higher
a reason the government expenditure multiplier is larger than 1 is because
government expenditure generate changes in consumption expenditure
the aggregate demand curve
has a negative slope
the US governments budget
has mostly been in deficit during the past 30 years
Which of the following does NOT describe a function of money? unit of account, hedge against inflation, medium of exchange, store of value
hedge against inflation
the aggregate expenditure curve shows
how planned aggregate expenditure and real GDP are related
autonomous consumption is that portion of consumption expenditure that is not influenced by
income
disposal income disposal income
income - taxes + transfer payments consumption + savings
which of the following is NOT one of the feds monetary policy tools? last resort loans, required reserve ratio, income tax rate, buying and selling US government securities
income tax rate
demand-pull inflation is an inflation that results from an initial ______________.
increase in aggregate demand
if the slope of the AE curve increases, the multiplier
increases
a government that currently has a budget deficit can balance its budget by
increasing tax revenues by more than it increases outlays
the sum of the components of aggregate expenditure that vary with real GDP
induced expenditures
the real interest rate...
is approximately equal to the nominal interest rate minus the inflation rate
the magnitude of the tax multiplier ________ the magnitude of the government expenditure multiplier.
is smaller than
the structural surplus
is the government budget surplus that would exist if the economy was at potential GDP
the federal open market committee
is the main policy-making organ of the federal reserve
the long run aggregate supply (LAS) curve
is vertical
a banks required reserves are calculated by multiplying
its deposits by the required reserve ratio
The economy is at point A when the money wage rate rise by 10%. If the price level is constant, firms will be willing to supply output equal to GRAPH: LAS vertical at xvalue 13. SAS1 equals LAS at (13,120); SAS0 equals LAS at (13,110); SAS2 equals LAS at (13,100). Point A is at (13,110).
less than $13 trill. rise in wage rate=SAS moves left, price level stays constant.
the slope of the consumption function is
less than 1
in the keynesian model of aggregate expenditure, real GDP is determined by the
level of aggregate demand
the largest component of the fiscal imbalance is
medicare
gross investment totaled
money invested that year before deductions
suppose that the economy is at point C. if the inflation rate is lower than expected, GRAPH: x-unemployment rate y-inflation rate; LRPC vertical at x=6; SRPC1 below SRPC2 both have curve shape like x&y axis are asymptotes. on SRPC1- point B (4,6) point A (6,4) point E (10,2); on SRPC2 point C (6,6) point D (4, 8)
neither the LRPC nor the SRPC will shift
credit cards are
not part of money because they represent a loan of money to the user
the largest source of government revenues
personal income taxes
in the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are
planned consumption expenditure and planned imports
the slope of the aggregate expenditure curve equals the change in
planned expenditure divided by the change in the real GDP
the slope of the aggregate expenditure curve equals the change in slope of AE curve
planned expenditure divided by the change in the real GDP (△planned expenditure/ △real GDP
a consumption function shows a
positive (direct) relationship between consumption expenditure and disposal income
the long run aggregate supply curve is vertical because
potential GDP is independent of the price level
all of the following are government outlays EXCEPT: interest on the governments debt transfer payments purchases of corporate bonds expenditure on goods and services
purchases of corporate bonds
equilibrium level of real GDP is
real GDP = consumption expenditure + investment + government expenditure + net exports
There are no taxes and no imports or exports. equilibrium level of expenditure is:
real GDP = total level of expenditures
At the point where AD quals SAS (short run equilibrium point)
real GDP exceeds potential GDP
In the long run
real GDP is equal to potential GDP
at a price level of 110 GRAPH: SAS & AD equilib @ (13, 100) (real GDP, price level)
real GDP is greater than the aggregate quantity demanded and firms will cut production
short run equilibrium real GDP short run equilibrium price level
real GDP value where AD and SAS interesect price level value where AD and SAS intersect
changes in all of the following SHIFT the supply curve of loanable funds EXCEPT: real interest rate wealth disposable income expected future income
real interest rate
a discretionary fiscal policy is a fiscal policy that
requires action by congress
one characteristic of automatic fiscal policy is that it
requires no legislative action by congress to be made effective
according to the intertemporal substitution effect, when price level increases, the interest rate
rises and the quantity of real GDP demand decreases
the Fed buys securities for $x from Bank. What is the effect?
securities increase by $x, Bank reserves increase by $x
when a depository institution "pools risk," it
spreads loan losses across many depositors so that no one depositor faces a high degree of risk
the federal government debt equals
sum of past budget deficits - sum of past budget surpluses
if actual GDP = $15 trillion, there is a budget ____________ equal to _____________. GRAPH: x-Real GDP y-expenditures, tax revenues, and budget balance; Line Tax Revenues has positive slope w/ points at (11,2.1) (13,2.2) (15, 2.3); Line Outlays has negative slope w/ points (11,2.3) (13,2.2) (15,2.1); Line Potential GDP is vertical at x=13 w/ mutual point (13,2.2)
surplus, $0.2 trillion
the Gaffer curve is the relationship between
tax rates and tax revenue
an example of automatic fiscal policy is when
tax revenues decrease as real GDP decreases
the discount rate is the interest rate
that the fed charges on its last resort loans
the structural deficit is the deficit
that would occur at full employment
the long run philips curve shows the relationship between then inflation rate and the unemployment rate when
the actual inflation rate equals the expected inflation rate
equilibrium expenditure occurs where
the aggregate expenditure curve crosses the 45-degree line
what might have shifted the short run Phillips curve from SRPC1 to SRPC2 while leaving the long run Phillips curve unchanged at LRPC? GRAPH: x-unemployment rate y-inflation rate; LRPC vertical at x=6; SRPC1 below SRPC2 both have curve shape like x&y axis are asymptotes. on SRPC1- point B (4,6) point A (6,4) point E (10,2); on SRPC2 point C (6,6) point D (4, 8)
the expected inflation rate increased
and open market operation involves
the federal reserves purchase or sale of securities
the federal funds rate is
the interest rate banks charge other banks for overnight loans
1-MPC equals
the marginal propensity to save
If there are not taxes or imports and MPC = x
the multiplier = 1 / (1-MPC) = 1 / MPS
the term "capital," as used in macroeconomics, refers to
the plant, equipment, buildings, and inventories of raw materials and semi-finished good
aggregate supply curve depicts the relationship between
the price level and the aggregate quantity supplied
gross investment
the purchase of new capital
the supply of real GDP is a function of
the quantities of labor, capital and the state of technology
the quantity theory of money predicts how changes in
the quantity of money affect the price level
the monetary base is
the sum of federal reserve notes, coins, and depository institutions' deposits at the federal reserve federal reserve notes + coins + depository institutions' deposits at the federal reserve
fiscal policy involves
the use of tax and spending policies by the government
Which of the following is NOT included in the M1 definition of money? currency held outside banks, time deposits, traveler's checks, checking deposits at savings and loans
time deposits
net investment totaled
total expenditures - depreciation total invested-loss
governments budget deficit or surplus equals
total tax revenue - total government outlays
Government outlays include
transfer payments, expenditure on goods and services, debt interest
the equation of exchange states that the price level is equal to P=
velocity of circulation multiplied by the quantity of money divided by real GDP = VM/Y
the long run phillips curve is
vertical at the natural unemployment rate
deficit on a graph
when different points share an x value or y value before the point of equilibrium or balance
surplus on a graph
when different points share an x value or y value past the point of equilibrium or balance