ECON 110 Exam 3

From the information in the table, M1 for June 2010 was

$1,737.4 billion

Suppose a bank has $1 million in deposits,a reserve requirement of 10%, and bank reserves of $300,000. The bank has excess reserves of

$200,000

if the reserve requirement is 25%, a new deposit of $1000 leads to a potential increase in the money supply of

$4000

Figure 9.10. Which statement is NOT correct

an increase in aggregate demand would lead to deflation

Figure 13.2. If the economy is at short-run equilibrium point b because of a negative supply shock, the Fed could enact an expansionary monetary policy, thus shifting the new equilibrium to point ___. As a result of this, the price level would _____ and real output would _____.

c; further increase; increase

when current real output is less than potential real output, the Fed will _____ interest rates in an effort to fight______

decrease; a recession

Automatic stabilizers ______ the intensity of business fluctuations, with ______ overt action by congress

decrease; no

Which of the following is not a reason why the aggregate demand curve is negatively sloped?

income effect

the Federal Reserve System includes ____ regional banks

12

Figure 9.2. If rising confidence in the economy eases job security fears, this will shift the AD curve from ADo to _____ and the price level will be at _______

AD1; Po

Figure 13.1. Starting at the equilibrium point b, if there is an increase in imports of a decrease in consumer demand, the demand curve will shift to _____, thus _____ the price level and ____ the real output

AD2; decreasing; decreasing

Currently the public debt in the United States is approx

$16.5 trillion

Aggregate supply shifts to the left when

input prices rise

if Jack Sparrow used a chest of gold Spanish pieces of eight to buy a ship, then the gold is functioning as a

medium of exchange

One debate from the Frontline "Economic Meltdown" video centered around

the bailout of Bear Stearns but not the Lehman Brothers

Which of the following illustrates the data lag?

the economy is predicted to increase at .1% in July, but the numbers are revised in August to reflect an actual 2% decrease

The single largest source of revenue for the federal government in 2009 was

the individual income tax

Which of the following events causes a decrease in aggregate demand?

taxes increase/government spending decrease

A nominal GDP of $265 billion and an M1 of $12 billion results in a velocity of _____

22.08

Figure 10.3. if the economy starts at below full employment, an expansionary fiscal policy will move the AD curve from _____ to ____, and the equilibrium will move from _____ to ____.

ADo; AD1; a; b

The US Treasury sells $2 billion in bonds to the Federal Reserve. The Federal Reserve credits the Treasury's account by $2 billion. This exchange is best described as:

monetizing the debt

According to the Taylor rule;

0.5%

If the government spending increases by $200 and the economy experiences an increase in real GDP form $2000 to $2600, what is the multiplier

3

The crowding-out effect arises from:

deficit spending that requires the government to borrow

if the marginal propensity to consume is 0.5, what is the effect on the equilibrium output of a $14 billion increase on taxes?

equilibrium output is reduced by $14 billion or $7 million