econ exam 2 lenon

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response to decrease in gdp

fed use monetary policy to increase aggregate demand so real gdp will increase and price level rises

if aggregate planned expenditure is less than real gdp then

firms inventories will increase and real gdp will decrease as production falls

At points on the AE curve above the 45 degree​ line, the value of aggregate expenditure is _________ than the value of real GDP.

greater

what is the federal open market committee

made up of 12 individuals that aids the board of governors in conducting monetary policy

expected inflation not perfectly anticipated

money wage rate changed but by a different percentage than the price level. real wage rate changes and there are deviations from full employment.

suppose the consumption function is given by the equation c=100+0.8YD where YD is disposable income. What is the mpc?

0.8

If the quantity of money increases by 1 percent a​ year, in the long run the change in the price level is ___ percent a year.

1

depository institutions benefits

1. creates liquidity (borrow short lend long) 2. pool risk: a loan might not be repaid 3. low cost of borrowing 4. low cost of monitoring borrowers

in an open economy where the mpc is 0.70 the proportional tax rate is .15 and the marginal propensity to import is .1, what is the value of the spending multiplier?

1/.505 = 1.98

simple money multiplier

1/RRR, where RRR is the required reserve ratio expressed as a decimal; if the required reserve ratio is 10% (0.1), the money multiplier is 1/0.1 = 10. For every $1 deposit the bank has to hold 10 cents.

An economy has a fixed price​ level, no​ imports, and no income taxes. MPC is 0.9​, and real GDP is ​$200 billion. Businesses increase investment by ​$2 billion. Calculate the new real GDP and explain why real GDP increases by more than ​$2 billion. The new level of real GDP is ​$___ billion.

220

given an mps of 0.80 if there are no income taxes or imports and prices are constant, then when investment increase by 50 million and prices are fixed, equilibrium gdp would increase by

250 million

An economy has a fixed price​ level, no​ imports, and no income taxes. MPC is 0.8​, and real GDP is ​$150 billion. Businesses increase investment by ​$5 billion. Calculate the multiplier and the change in real GDP. The multiplier is __. The increase in real GDP is ​$__billion.

5;25

suppose that the money multiplier is 4. if the fed sells government securities in the amount of $2 million, the quantity of money will a. decrease by 8 million b. increase by 500,000 c. decrease by 500,000 d. increase by 8 million

???

commercial bank

A financial institution that accepts demand deposits and makes loans and provides other services for the public

deflation

A persistent or continuing fall in the average price level

thrift institutions

A savings and loan association, mutual savings bank, or credit union.

securities

All of the investments, including stocks, bonds, mutual funds, options, and commodities, that are traded.

loans

An amount of money provide by one party to another with the understanding that the money will be returned, in full, often with interest.

how can deflation be ended

By increasing the growth rate of money. Make the money growth rate exceed the growth rate of real GDP minus the rate of velocity change.

deposits

Checks or cash put into a bank account

monetary policy

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.

federal fund rate

Interest rate banks charge each other for loans

m2 consists of

M1 plus savings accounts, small-time deposits, money market mutual funds, and miscellaneous near-monies.

Amount ​(billions of dollars​) Small time deposits 425.0 Retail Money Market Funds. 1,201.1 Demand Deposits. 5,108.3 Other Liquid Deposits 12,317.3 Currency 2,215.4 In January 2023​, M1 was ​$_____ billion. In January 2023​, M2 was $______ billion.

M1: 19641 M2: 21267.1

equation of exchange

MV = PY where M is the money supply, V is velocity of money, P is the average price level and Y is the real output of goods and services produced in an economy. MV equals total spending. PY equals nominal GDP and also Total Revenue.

present value formula

PV = FV / (1+r)^n

The discount rate is the interest rate that

The Federal Reserve charges when it loans reserves to depository institutions.

Mainstream Business Cycle Theory

Potential GDP (LAS) grows at a steady rate while AD growth fluctuates AD grows faster than LAS = expansion AD grows slower than LAS = contraction Includes Classical, Keynesian, and Monetarist schools of thoughts

federal reserve system

The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates

discount rate

The interest rate on the loans that the Fed makes to banks

total reserves

The sum of a bank's deposits in its reserve account at the Fed and its vault cash

reserve requirement

This is the percentage of their deposits that member banks must keep available in a Federal Reserve Bank.

in the short run, an increase in government expenditure on goods and services ___ real gdp and ______ the price level a. increase;rises b. increases;falls c. decreases;rises d. decreases;falls

a

members of the federal reserve system's board of governors a. hold 14 year staggered terms b. are elected for life c. are a special subcommittee of the senate d. are elected at large by district banks

a

money is created by a. banks making loans and monetizing the loans through the creation of checkable deposits b. banks paying for depositors insurance c. government taxation d. banks taking in deposits

a

reserves are a. cash in a banks vault plus its deposits at federal reserve banks b. gold in a banks vault c. cash in a banks vault plus gold at federal reserve d. cash in a banks vault plus cash carried by customers

a

suppose consumers decrease their consumption expenditure because they worry about their future income. there is a. leftward shift of aggregate demand curve b. upward movement along the aggregate demand curve c. rightward shift of the aggregate demand curve d. downward movement along the agregate demand curve

a

when a depository institution pools risk, it a. spreads loan losses across many depositors so that no one depositor faces high risk b. makes loans to just one firm c. buys short and lends long d. borrows reserves from the federal reserve

a

cost-push inflation

a sustained rise in the price level caused by a leftward shift of the aggregate supply curve. when prices rise due to an increase in the money price of raw materials or an increase in money wage rates.

Keynesian cycle theory

a theory that fluctuations in investment driven by fluctuations in business confidence - summarized by the phrase "animal spirits" - are the main source of fluctuations in aggregate demand

the multiplier effect on real gdp occurs because

an autonomous change in expenditure causes an induced change in consumption expenditure.

A fall in the price level​ _______ the nominal interest rate in the short run. A. does not change B.lowers C.raises

b

A means of payment is a method of ​ _____ a debt. A. creating B. settling C. transferring D. paying interest on

b

Classical macroeconomists recommend​ _______. A. policies that actively offset changes in​ long-run aggregate supply that result in negative economic growth B. policies that minimize the disincentive effects of taxes on​ employment, investment, and technological change C. policies that actively offset changes in aggregate demand that bring recession D. an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand

b

Depository institutions pool risk by using funds obtained from​ _______ depositors to make loans to​ _______ borrowers. A. ​few; few B. ​many; many C. ​many; few D. ​few; many

b

because the short run aggregate expenditure model assumes that the price level is ____, its predicted effect of changes in autonomous expenditure on equilibrium output is _____ than the prediction of the ad/sas model a. flexible;greater b. fixed;greater c. flexible;less d. fixed; less

b

Currency consists of​ _____. A. smart cards B. U.S. government bonds C. notes​ (dollar bills) and coins D. checking account deposits

c

Unplanned reserves are a​ bank's _____ reserves minus its​ _____ reserves. A. ​revenue; capital B. ​capital; revenue C. ​actual; desired D. ​desired; actual

c

currency drain ratio

currency / total deposits

A reason for the difference in the values between the countries may be​ _______. A. the larger size of​ China's population B. the trade imbalance between China and the United States C. incomes are higher in the United States D. U.S. consumers are more confident about the future

d

Why does the business cycle​ occur? The business cycle occurs because​ _______. A. potential GDP is​ increasing, and increases in aggregate demand cannot keep pace with increases in​ long-run aggregate supply B. the government is constantly trying to produce an inflationary​ gap, but expenditures in the economy cannot keep pace with the​ government's agenda C. the Fed is constantly increasing the quantity of money D. aggregate demand and​ short-run aggregate supply​ fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP

d

checking deposits at banks are a. money only because they are insured by FDIC b. not money until they are converted c. not money because they are an intagible asset d. money

d

depository institutions a. make profit by changing government for their services b. make zero profit but receive compensation by the government because their services are so valuable c. make profit accounting to how the Fed pays them d. make profit from the spread between the interest rate they pay on deposits and the interest rate they receive on loans

d

New Keynesian Cycle Theory

emphasizes the fact that today's money wage rates were negotiated at many past dates, which means that past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.

Along the 45 degree​ line, aggregate expenditure ________ real GDP.

equals

autonomous consumption is that portion of consumption expenditure that is not influenced by

income

As required reserve ratio decreases the money multiplier and money supply

increase

open market purchase

increase supply of reserves, federal funds rate falls

open market purchase from the fed _____ money supply

increases

demand pull inflation

increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand. real gdp > potential gdp. decreases short run aggregate supply.

economic growth __________

is an increase in potential gdp as long run aggregate supply curve shifts rightward

At points on the AE curve below the 45 degree​ line, the value of aggregate expenditure is ______ than the value of real GDP

less

discount window loans

loans the federal reserve makes to banks, fed lowers the discount rate and reserves go up because banks borrow more which expands the money supply.

cash assets

notes and coins in its vault or its deposit at the Federal Reserve

Dual Mandate of the Fed

price stability and high employment

consequences of deflation

redistributes income and wealth, lowers real gdp and employment, and diverts resources from production

when actual inflation is higher than expected inflation

redistribution of income from employee to employer

when actual inflation is less than expected inflation

redistribution of income from employer to employee

tools of monetary policy

reserve requirement, discount rate, open market operations

technological progress will

shift both the LAS and SAS curves rightward

in the mainstream business cycle theory, the money wage rate is

sticky

present value

the amount of money you would need to deposit now in order to have a desired amount in the future

open market operations

the buying and selling of government securities to alter the supply of money

Liquidiity

the ease with which an asset can be converted into a medium of exchange

quantitative easing

the introduction of new money into the money supply by a central bank. large scale asset purchases. increase liquidity in banking system and reduce long term interest rate.

currency

the notes and coins held by individuals and businesses

expected inflation

when inflation is anticipated the money wage rate changes to keep up with the anticipated inflation. ad curve shifts right, increasing price level, money wage rate increases and sas curve shifts left.

quantitative tightening

when the Fed sells longer-term government bonds or other securities. reducing balance sheet and monetary base of the fed

If the price level and the money wage rate rise by the same​ percentage, the quantity of real GDP supplied​ _______ and there is a movement up along the​ _______ aggregate supply curve. A. does not​ change; long-run B. ​decreases; long-run C. does not​ change; short-run D. ​increases; short-run

a

If the trend rate of change of velocity is 1 percent a​ year, potential GDP grows by 4 percent a​ year, and the money growth rate is 2 percent a​ year, what is the trend inflation​ rate? A. ​-1 percent a year B. 7 percent a year C. 1 percent a year D. ​-5 percent a year

a

In times of​ recession, the Fed​ _______ the interest rate and​ _______ the quantity of money. A. ​lowers; increases B. ​raises; decreases C. ​raises; increases D. ​lowers; decreases

a

2. Why can cryptocurrencies be considered as​ money? Cryptocurrencies can be considered as money when they are​ _______. A. increasingly acceptable as a means of payment B. more available than national currencies C. regulated in crypto exchanges by central banks D. a good store of value especially during times of rapid inflation

a

A depository institution creates liquidity by​ _______. A. borrowing short and lending long B. borrowing long and lending short C. paying high interest rates on deposits D. eliminating​ high-risk loans

a

A depository institution is a​ _______. A. financial firm that takes deposits from households and firms B. financial firm that has three types of liabilities—cash ​liabilities, securities, and loans C. commercial institution that practices 100 percent reserve banking D. ​bank's bank and a public authority that conducts the​ nation's monetary policy

a

A monetarist is a macroeconomist who believes that the economy is​ self-regulating and that it will normally operate​ _____, provided that monetary policy is not erratic and that the pace of​ _____ is kept steady. A. at full​ employment; money growth B. at full​ employment; economic growth C. below full​ employment; technological growth D. above full​ employment; technological growth

a

A movement along the aggregate demand curve occurs if​ _______. A. the price level changes and all other factors remain unchanged B. government expenditure or the interest rate​ change, and the price level remains the same C. the price​ level, the exchange rate or foreign income​ change, and the​ full-employment quantity of labor remains the same D. expectations about future inflation or future income​ change, and the money wage rate remains the same

a

Aggregate planned expenditure is the sum of planned​ _____. A. consumption​ expenditure, investment, government​ expenditure, and exports minus imports B. consumption​ expenditure, savings, net​ taxes, and net exports C. borrowing in the loanable funds market by​ households, firms,​ government, and the rest of the world D. aggregate demand and aggregate supply

a

Deflation is caused by​ _______. A. aggregate demand increasing at a persistently slower rate than aggregate supply B. aggregate demand increasing at a persistently faster rate than aggregate supply C. a slowdown in the growth rate of the quantity of money D. a slowdown in the growth rate of potential GDP

a

Equilibrium expenditure comes about because firms change their​ _______ in response to unplanned changes in​ _______. A. ​production; inventories B. ​prices; inventories C. ​prices; production D. ​inventories; production

a

For a given increase in aggregate​ demand, the steeper the slope of the​ short-run aggregate supply​ curve, the​ _______ is the increase in the price level and the​ _______ is the multiplier effect on real GDP in the short run. A. ​larger; smaller B. ​smaller; smaller C. ​smaller; larger D. ​larger; larger

a

Give some examples of fiscal policy that increase aggregate demand. Examples of fiscal policy that increase aggregate demand include​ ______. A. an increase in government​ expenditure, a decrease in​ taxes, and an increase in transfer payments B. a decrease in taxes and an increase in the quantity of money C. a decrease in taxes and a decrease in interest rates D. an increase in transfer payments and an increase in interest rates

a

How can deflation be​ ended? Deflation can be ended by​ _______. A. increasing the growth rate of the quantity of money B. increasing the quantity of money C. decreasing the velocity of circulation D. increasing the growth rate of potential GDP

a

If real GDP and aggregate expenditure are less than equilibrium​ expenditure, what happens to​ firms? inventories? How do firms change their​ production? And what happens to real​ GDP? ​Firms' inventories decrease​, ... ... so they ​ ______ production, and real GDP​ ______. A. ​increase; increases B. ​decrease; increases C. ​increase; decreases D. ​decrease; decreases

a

If real GDP increases by​ $2 million and potential GDP increases by​ $3 million and the marginal propensity to import is​ 0.2, by how much do imports​ change? A. Imports increase by​ $400,000. B. Imports decrease by​ $400,000. C. Imports decrease by​ $200,000. D. Imports increase by​ $600,000

a

M2 consists of​ _____ plus​ _____ and​ _____. A. ​M1; small-denomination time​ deposits; money market mutual funds B. fiat​ money; debts; checkable deposits C. ​M1; debts; money market mutual funds D. regular​ expenses; mortgages; individual retirement accounts

a

Other things remaining the​ same: A decrease in real GDP​ _______ the nominal interest rate in the short run. A decrease in the money supply​ _______ the nominal interest rate in the short run. A. lowers​; raises B. raises​; lowers C. raises​; raises D. lowers​;

a

Potential GDP increases when​ _______. A.the full dash employment quantity of labor increases the full-employment quantity of labor increases B.inflation decreases inflation decreases C.the price level falls the price level falls D.the money wage rate increases

a

Reserves consist of the currency in the​ _____ plus the balance on its​ _____ account at​ _____. A. ​bank's vaults;​ reserve; a Federal Reserve Bank B. savings​ account; money​ market; an investment bank C. checking​ account; certificate of​ deposit; a Federal Reserve Bank D. ​market; reserve; a savings bank

a

Rising​ gasoline, electricity, and natural gas prices can lead to​ _______ inflation. Increasing household spending can lead to​ _______ inflation. A. ​cost-push; demand-pull B. ​cost-pull; demand-push C. ​cost-push; cost-push D. ​demand-push; demand-pull

a

Suppose the Fed buys​ $50 million of government securities from the Bank of America. Do the​ Fed's total assets and total liabilities​ change? Do the Bank of​ America's total assets and total liabilities​ change? The Bank of​ America's total assets​ _______ and its total liabilities​ _______. A. do not​ change; do not change B. decrease by​ $50 million; do not change C. increase by​ $50 million; decrease by​ $50 million D. decrease by​ $50 million; increase by​ $50 million

a

The MPS in the United States is​ _______ than the MPS in​ China, and the MPC in the United States is​ _______ than the MPC in China. A. ​smaller; larger B. ​smaller; smaller C. ​larger; larger D. ​larger; smaller

a

The U.S. price level rises. This event​ _______. A. increases the quantity of real GDP supplied B. increases​ short-run aggregate supply C. decreases the quantity of real GDP supplied D. increases​ long-run aggregate supply

a

The change in the quantity of money if the monetary base increases by​ $1 billion is​ _______. A. ​$3.2 billion B. ​$3.6 billion C. ​$0.32 billion D. ​$1 billion

a

The demand for money is the relationship between the quantity of money demanded and the​ _____, when all other influences on the amount of money that people wish to​ _____ remain the same. A. nominal interest​ rate; hold B. quantity of​ output; spend C. real wage​ rate; spend D. real interest​ rate; hold

a

The events which could have changed​ short-run aggregate supply from SAS Subscript 0 to SAS Subscript 1 are​ _______. A. a rise in the money wage rate or a rise in the money price of any other factor of production B. a rise in the interest rate or a decrease in the quantity of money C. an increase in taxes or a decrease in government expenditures D. a decrease in expected future profits or an increase in expected inflation

a

The federal funds rate is the​ _____ rate on​ _____ loans. A. ​interest; interbank B. ​interest; federal government C. ​exchange; federal government D. ​exchange; interbank

a

The increase in personal consumption expenditures and exports​ _______ aggregate demand. The increase in imports​ _______ aggregate demand. A. ​increases; decreases B. ​increases; increases C. ​increases; has no effect on D. ​decreases; decreases

a

The interest on reserve rate is the interest rate that​ _____ on​ ______. A. banks​ earn; their reserves held at the Fed B. ​banks; their vault cash C. governments​ pay; loans from the Fed D. depository institutions​ pay; reserves held at the Fed

a

The marginal propensity to import is equal to​ _______. A. the change in imports divided by the change in real​ GDP, other things remaining the same B. imports minus exports C. disposable income minus consumption expenditure minus saving divided by real GDP D. the change in net imports divided by the change in disposable​ income, other things remaining the same

a

The marginal propensity to save is​ _______. A. the fraction of a change in disposable income that is saved B. equal to the slope of the 45° line C. the percentage of a​ household's income that is not spent on consumption goods and services D. greater than the slope of the 45° line

a

The multiplier is the amount by which the change in​ ______ expenditure is magnified or multiplied to determine the change in​ _______. A. ​autonomous; equilibrium expenditure and real GDP B. ​induced; equilibrium expenditure and real GDP C. ​autonomous; inventories D. ​induced; inventories

a

The relationship between saving and​ _____, other things remaining the​ same, is called the saving function. A. disposable income B. the price level C. aggregate demand D. consumption expenditure

a

The supply of money is the relationship between the quantity of money supplied and the​ _____, when all other influences on the amount of money that the Fed and banks wish to​ _____ remain the same. A. nominal interest​ rate; create B. real interest​ rate; create C. price​ level; hold D. quantity of​ output; lend

a

We calculate the marginal propensity to consume as​ _______, and the marginal propensity to save as​ _______. A. ΔC÷ΔYD​; ΔS÷ΔYD B. ΔC÷ΔY​; ΔS÷ΔY C. ​0; 1 D. ​1; 0

a

What does the multiplier​ determine? For every dollar increase in​ ______ expenditure, the multiplier determines the increase in real GDP. A. autonomous B. induced C. consumption

a

When aggregate planned expenditure is less than real​ GDP, inventories are ​_______, so production​ _______ and inventories return to their target level as the economy moves to equilibrium expenditure. A. above target​; decreases B. below target​; increases C. below target​; decreases D. above target​;

a

Which of the following economies is facing a stagflation​? A. The European economy is experiencing a decrease in real GDP for three quarters and a rise in the price level. B. The Fed is purchasing government securities to lower the interest rate. C. The Chinese economy is facing a rising labor cost. D. Japan has announced an increase in public expenditure.

a

Why​ isn't all consumption expenditure induced​ expenditure? All consumption is not induced expenditure because​ _______. A. even a person with no income must buy​ life's necessities B. consumers save C. some purchases are made using credit cards D. even with no income a person enjoys some luxuries

a

You observe that unplanned inventories are increasing. You predict that there will be​ _______. A. a recession B. a business cycle C. a peak D. an expansion

a

aside from being a means of payment, other functions of money are a. medium of exchange, unit of account, and store of value b. medium of exchange and the ability to buy goods and services c. pricing, contracts and store of value

a

​Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the ​ _____ changes in step with the price level to maintain full employment. A. money wage rate B. real wage rate C. quantity of money D. interest rate

a

money market mutual fund

a fund that pools money from small savers to purchase short-term government and corporate securities

stagflation

a period of slow economic growth and high unemployment (stagnation) while prices rise (inflation)

Deflations are usually​ unanticipated, and among other​ things, unanticipated deflation brings all of the following except​ _______. A. a redistribution of income and wealth B. falling real wage rates for workers with​ long-term wage contracts C. a decrease in real GDP D. a decrease in employment

b

Economic growth results from​ _______. A. the decisions of the Federal Reserve to cut interest rates​, which increase​ long-run aggregate supply B. a growing supply of labor and increasing labor​ productivity, which increase​ long-run aggregate supply C. a falling nominal wage rate​, which increases​ short-run aggregate supply D. a rising exchange rate​, which increases aggregate demand

b

If aggregate demand grows faster than potential​ GDP, ______ gap emerges and if it grows more slowly than potential​ GDP, ______ gap emerges. A. neither an inflationary nor a​ recessionary; a recessionary B. an​ inflationary; a recessionary C. a​ recessionary; an inflationary D. neither an inflationary nor a​ recessionary; neither an inflationary nor a recessionary

b

In Keynesian cycle theory​, fluctuations in​ _____ driven by fluctuations in business confidence—summarized by the phrase​ "animal ​spirits"—are the main source of fluctuations in​ _____. A. ​investment; aggregate supply B. ​investment; aggregate demand C. interest​ rates; real GDP D. interest​ rates; inflation rates

b

Keynesian macroeconomists recommend​ _______. A. policies that minimize the disincentive effects of taxes on​ employment, investment, and technological change B. policies that actively offset changes in aggregate demand that bring recession C. policies that actively offset changes in​ long-run aggregate supply that result in negative economic growth D. an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand

b

Stagflation is a combination of a​ _______ in the price level and​ _______ in real GDP. A. ​rise; an increase B. ​rise; a decrease C. ​fall; an increase D. ​fall; a decrease

b

Starting from a​ full-employment equilibrium, an increase in aggregate demand​ _______, and creates​ _______ gap. A. decreases real GDP below potential​ GDP; a recessionary B. increases real GDP above potential​ GDP; an inflationary C. decreases real GDP below potential​ GDP; an inflationary D. increases real GDP above​ potential; a recessionary

b

The aggregate demand curve shows the relationship between the quantity of real GDP demanded and​ _______ when everything else remains the same. A. the quantity of real GDP supplied B. the price level C. expected future​ income, inflation, and profits D. the interest rate

b

The best forecast​ available, which is based on all the relevant information is called​ _______. A. a rational forecast B. a rational expectation C. a correct forecast D. a correct expectation

b

The business cycle is actually a continuous series of different​ ______. A. potential GDP values B. ​short-run macroeconomic equilibriums C. ​full-employment equilibriums D. nominal GDP values

b

The combination of a rising​ _____ and decreasing​ _____ is called stagflation. A. unemployment​ rate; productivity B. price​ level; real GDP C. interest​ rate; productivity D. price​ level; consumption expenditure

b

The decrease in investment​ _______ aggregate demand. The decrease in government expenditure​ _______ aggregate demand. A. ​increases; has no effect on B. ​decreases; decreases C. has no effect​ on; decreases D. ​decreases; increases

b

The defining feature of the classical view of macroeconomics is that the economy is​ _______. A. rarely at full employment B. ​self-regulating and always at full employment C. driven by expectations called​ "animal spirits" D. constantly bombarded by shocks that arise from the uneven pace of technological change

b

The main assets of the Fed are​ _______. The​ Fed's assets are​ _______. A. gold and foreign exchange and loans to​ banks; the backing for the monetary base B. U.S. government securities and​ mortgage-backed securities; the backing for the monetary base C. currency and reserves of depository​ institutions; the uses of the monetary base D. U.S. government​ securities, mortgage-backed​ securities, and​ currency; the sources of the monetary base

b

The money multiplier can be calculated as​ _______, where C is​ currency, D is​ deposits, and R is​ banks' reserves. A. ​C/D÷​(​C/D ​ + ​R/D​) B. ​(1 + ​C/D​)÷​(​R/D​ + ​C/D​) C. ​(​C/D ​ + ​R/D​)÷​(1 ​+ ​R/D​) D. ​(​C/D ​ + ​R/D​)÷​(1 ​+ ​C/D​)

b

The money multiplier is the ratio of the change in the quantity of​ _______ to the change in the quantity of​ _______. A. ​currency; bank deposits B. ​money; monetary base C. ​money; bank deposits D. ​M1; M2

b

The multiplier increases when the marginal propensity to consume​ _______. A. equals the marginal propensity to save B. increases C. decreases D. becomes negative

b

The multiplier increases when the marginal propensity to import​ _______ or the income tax rate​ _______. A. ​increases; decreases B. ​decreases; decreases C. ​increases; increases D. ​decreases; increases

b

The output gap in the graph is​ _______ because​ _______. A. a below​ full-employment gap; the unemployment rate is greater than the natural rate B. a recessionary​ gap; potential GDP exceeds real GDP C. an inflationary​ gap; potential GDP exceeds real GDP D. a deflationary​ gap; the only way for the economy to return to full employment is for the price level to fall

b

The quantity theory of money is that in the​ _______, an increase in the quantity of money brings an equal percentage​ _______. A. long​ run; increase in the nominal interest rate B. long​ run; increase in the price level C. short​ run; increase in the price level D. long​ run; decrease in the price level

b

The velocity of circulation is the average number of times a dollar of money is used annually to buy​ ______. The formula used to measure the velocity of​ circulation, V​, is​ ______, where P is the price​ level, Y is real​ GDP, and M is the quantity of money. A. stocks and​ bonds; V​ = ​(P÷Y​)×M B. the goods and services that make up​ GDP; V​ = ​(P×Y​)÷M C. foreign goods and​ services; V​ = ​(P×Y​)÷M D. the goods and services that make up​ GDP; V​ = ​(P÷Y​)×M

b

To increase the quantity of​ money, the Fed can​ _______. A. make an open market​ sale, and raise the discount rate and the interest on reserves rate B. make an open market​ purchase, and lower the discount rate and the interest on reserves rate C. make an open market​ sale, and lower the discount rate and the interest on reserves rate D. make an open market​ purchase, and raise the discount rate and the interest on reserves rate

b

Toyota and Honda build additional plants in the United States. This event​ _______ short-run aggregate supply and​ _______ long-run aggregate supply. A. ​increases; does not change B. ​increases; increases C. does not​ change; does not change D. does not​ change; increases

b

What is the effect of a change in the supply of money in the long​ run? In the long​ run, an increase in the supply of money​ _______. A. increases real​ GDP, employment, the real interest​ rate, and the price level B. does not change real​ GDP, employment, and the real interest rate. The price level rises C. increases the price level and the real interest rate. Real GDP and employment​ don't change D. increases the demand for​ money, and the nominal interest rate may​ rise, fall, or remain the same

b

When the Fed lowers the interest​ rate, _______. A. consumption expenditure and investment​ decrease, which decreases aggregate demand and real GDP decreases B. consumption expenditure and investment​ increase, which increases aggregate demand and the price level rises C. ​short-run aggregate supply decreases and the price level rises D. aggregate demand increases and​ short-run aggregate supply​ decreases, and the price level rises

b

Why are​ checks, debit​ cards, and credit cards not​ money? A. ​Checks, debit​ cards, and credit cards are not currently considered as money. Eventually economists expect that they will be included as components of M2. B. Checks and debit cards are not money. They are instructions to the bank to transfer money from one account to another. A credit card is not money. It is an ID card that allows you to take out a loan. C. Debit cards and credit cards are never money because they are not issued by the Federal Reserve. A check is money in the short run before the recipient deposits it but in the long run a check is not money. D. In the short​ run, checks and debit cards are money until the transaction is finalized. In the long​ run, checks and debit cards are not money. A credit card is never money. It is an ID card that allows you to take out a loan.

b

an increase in currency held outside the banks is a. wealth b. a currency drain c. a currency surplus

b

depository institutions are good at minimizing a. risky borrowers b. costs of monitoring borrowers c. liquidity

b

if the price level doubles a. the demand for money drops by half b. the demand for money doubles c. the supply for money drops by half d. none of the above

b

m1 is a measure of a. money and includes both checkable deposits and retail money market mutual funds b. money and includes both currency and checkable deposits c. money and includes both retail money market mutual funds and currency

b

suppose the economy is initially on the demand for money curve MD1. what is the effect of an increase in the use of credit cards? a. demand for money curve shifts rightward. b. demand for money curve shifts leftward. c c. there would be movement upward along the demand curve

b

unemployment caused by people voluntarily leaving their jobs is called a. cyclical b.. frictional c. seasonal

b

when money is accepted as payment in a market transaction, it is functioning as a. unit of account b. medium of exchange c. store of value

b

​Firms' inventories increase​, ... ... so they​ _______ production, and real GDP​ _______. A. ​increase; increases B. ​decrease; decreases C. ​decrease; increases D. ​increase; decreases

b

A rational expectation is a forecast that results from the use of all the relevant data and​ _____. A. a logical conclusion B. economic news C. economic science D. economic intuition

c

An above​ full-employment equilibrium is an equilibrium when real GDP​ _____. A. equals the interest rate B. equals the price level C. exceeds potential GDP D. equals potential GDP

c

An inflation that is kicked off by an increase in​ _____ is called ​cost-push inflation. A. aggregate supply B. productivity C. costs D. aggregate demand

c

An inflation that starts because​ _____ is called ​demand-pull inflation. A. aggregate supply increases B. the cost of production increases C. aggregate demand increases D. the interest rate rises

c

As we move up along the​ short-run aggregate supply​ curve, _______. A. potential GDP increases B. the money wage rate and the prices of other resources change by the same percentage C. the money wage​ rate, the prices of other​ resources, and potential GDP remain constant D. the real wage​ rate, the prices of other​ resources, and potential GDP remain constant

c

Business investment is a component of ​ _______ aggregate expenditure. When it​ increases, the AE curve​ _______ and equilibrium expenditure increases. A. ​autonomous; becomes steeper B. ​induced; becomes steeper C. ​autonomous; shifts upward D. ​induced; shifts upward

c

Choose the correct statement about money. A.Money in the United States today is made up of notes and coins held by individuals and businesses. Money in the United States today is made up of notes and coins held by individuals and businesses. B.Upper A work of art is an example of money because it can act as a store of value. A work of art is an example of money because it can act as a store of value. C. Deposits are money because they can be used to make payments. D.Money is a completely stable store of value.

c

Choose the correct statement about the LAS curve. A. The LAS shifts rightward when the SAS curve shifts rightward and shifts leftward when the SAS curve shifts leftward. B. The LAS curve shifts rightward when the money wage rate falls. C. The LAS curve is vertical because potential GDP is independent of the price level. D. Along the LAS curve the money wage rate is constant and the real wage rate rises as the price level rises.

c

Choose the correct statement. A. The quantity of real GDP demanded depends on the quantity of real GDP supplied. B. The higher the price​ level, the greater is the quantity of real GDP demanded. C. The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports. D. The aggregate demand curve slopes downward because of the wealth effect and the money wage rate.

c

Choose the correct statements. 1. The president of the San Francisco Fed is always a member of the FOMC. 2. The Chicago Fed implements the policy decisions of the FOMC. 3. The FOMC meets approximately every six weeks. 4. FOMC stands for Federal Open Market Committee. A. Statements 2 and 4 are correct. B. Statements 1 and 2 are correct. C. Statements 3 and 4 are correct. D. Statements 1 and 3 are correct.

c

Deflation is a​ _______. A. ​one-time fall in the price level B. decrease in a​ country's exports C. persistently falling price level D. fall in profit expectations

c

Disposable income is aggregate income minus taxes plus​ _____. A. transfer payments minus saving and minus consumption B. transfer payments minus saving C. transfer payments D. transfer payments minus consumption

c

If actual inflation exceeds expected​ inflation, then the unemployment rate​ _______ the natural unemployment rate. If actual inflation is less than expected​ inflation, then the unemployment rate​ _______ the natural unemployment rate. A. ​equals; rises above B. rises​ above; falls below C. falls​ below; rises above D. falls​ below; equals

c

If the monetary base increases by​ $1 million and the quantity of money increases by​ $2.5 million, then the money multiplier is​ _____. A.2 B.1 C.2.5 D.2.8

c

Induced consumption expenditure​ _______. Autonomous consumption expenditure​ _______. A. decreases as real GDP​ increases; increases as real GDP increases B. increases as real GDP​ increases; decreases as real GDP increases C. varies with real​ GDP; does not vary with real GDP D. does not vary with real​ GDP; varies with real GDP

c

The balanced budget multiplier equals the change in equilibrium expenditure and real GDP that results from equal changes in​ _____ divided by the change in government expenditure. A. aggregate demand and aggregate supply B. tax receipts and outlays C. government expenditure and​ lump-sum taxes D. exports and imports

c

The consumption function is the relationship between consumption expenditure and​ _____, other things remaining the same. A. aggregate demand B. saving C. disposable income D. the price level

c

The cost of inflation to society includes : I. the opportunity costs of resources used by people to protect themselves against inflation II. the diversion of productive resources to forecasting inflation a. I only b. II only c. both I and II d. neither

c

The currency drain ratio is 0.10 and the​ banks' reserve ratio is 0.25. Calculate the money multiplier and the change in the quantity of money if the monetary base increases by​ $1 billion. The money multiplier equals​ _______. A 3.6 B. 0.28 C 3.1 D. 0.32

c

The discount rate is the interest rate at which​ _______ that is short of reserves can borrow from the​ _____. A. the​ Fed; Bank of International System B. the​ Fed; government C. a​ bank; Fed D. a​ bank; government

c

The equation of exchange is​ ______ and it is true​ ______. A. MP​ = YV​; by definition B. MV​ = PY​; in the short run only if the rate of velocity change is approximately equal to zero C. MV​ = PY​; by definition D. MP​ = YV​; in the short run only if the rate of velocity change is approximately equal to zero

c

The government expenditure multiplier equals the change in​ _____ that results from a change in government expenditure divided by the change in government expenditure. A. aggregate supply B. consumption expenditure C. equilibrium expenditure and real GDP D. investment

c

The main influences on the quantity of money that people and businesses plan to hold include the​ _______. A. quantity of real money​ supplied, the nominal interest​ rate, and the price level B. number of depository institutions in the​ economy, the decisions of the Federal​ Reserve, and the real interest rate C. nominal interest​ rate, real​ GDP, and financial​ technology, and the price level D. quantity of reserves in the banking system and financial technology but the demand for money is independent of the price level

c

The marginal propensity to consume is​ _______. A. the percentage of a​ household's income that is not saved B. greater than the slope of the 45° line C. the fraction of a change in disposable income that is spent on consumption D. equal to the slope of the 45° line

c

The new Keynesian cycle theory emphasizes the fact that​ today's money wage rates were negotiated at many past​ dates, which means that​ _____ rational expectations of the​ _____ price level influence the money wage rate and the position of the SAS curve. A. ​current; current B. ​past; past C. ​past; current D. ​current; pastc

c

U.S. household wealth grew to​ $136.9 trillion in the first quarter of 2021. Rising stock prices added​ $3.2 trillion to household financial assets and rising real estate values added​ $1 trillion. Explain why higher stock prices and higher real estate values are equivalent to saving. Higher stock prices and higher real estate values are equivalent to saving because both increase​ _______. A. consumption expenditure B. real GDP C. household wealth D. investment

c

What is the effect of an increase in potential​ GDP? An increase in potential GDP increases​ _______. A. the money wage rate B. the price level C. both​ long-run aggregate supply and​ short-run aggregate supply D. ​long-run aggregate supply but does not increase​ short-run aggregate supply unless technology advances

c

When costs increase and the Fed wants to return the economy to full​ employment, the Fed responds by​ _______ the quantity of money. If the Fed continually responds to successive increases in​ costs, a​ _______ inflation evolves. A. ​decreasing; cost-push B. ​increasing; demand-pull C. ​increasing; cost-push D. ​decreasing; demand-pull

c

Which of the following is money​? A. ​Paulo's stash of Bitcoin B. ​Ron's debit card C. ​Charlie's checking account deposit at the Bank of America D. ​Jen's credit card

c

Which of the following statements illustrates fiscal policy​? A. The Fed has increased its reserve requirement. B. A stronger dollar has lowered U.S. exports. C. The U.S. government has proposed a hike in the corporate tax rate. D. A rise in the expected future profits has increased U.S. investments.

c

in response to the pandemic and recession, the fed announced a round of quantitative easing where the fed purchased trillions of dollars of securities. what impact would quantitive easing have on the monetary base? a. it would decrease b. it would not change c. it would increase

c

the relationship between the multiplier and the mpc is a. converging at higher incomes b. that as the mpc increase the value of the multiplier decrease c. that as the mpc increase, so does the value of the multiplier

c

​Long-run macroeconomic equilibrium occurs when real GDP​ _____ potential GDP—​equivalently, when the economy is on its​ _____ curve. A. is less​ than; AD B. ​exceeds; LAS C. ​equals; LAS D. ​exceeds; SAS

c

​Short-run aggregate supply is the relationship between the quantity of​ _____ supplied and the​ _____ when the money wage​ rate, the prices of other​ resources, and potential GDP remain constant. A. nominal​ GDP; exchange rate B. real​ GDP; interest rate C. real​ GDP; price level D. potential​ GDP; price level

c

A bank manager tells you that she​ doesn't create money. She just lends the money that people deposit. Explain why she is wrong. The bank manager is wrong because​ _______. A. the more currency her customers​ deposit, the greater the incentive for the Fed to authorize her bank to create loans B. when her customers deposit currency in the​ bank, the quantity of money increases by the amount of the new deposit C. in addition to loaning out the money that people​ deposit, she also lends what her bank receives from the Fed D. every new loan creates a new​ deposit, and a new deposit is new money

d

An economy has a fixed price​ level, no​ imports, and no income taxes. MPC is 0.9​, and real GDP is ​$200 billion. Businesses increase investment by ​$2 billion. Calculate the new real GDP and explain why real GDP increases by more than ​$2 billion. Real GDP increases by more than ​$2 billion because the increase in investment​ _______. A. increases the marginal propensity to consume B. enables firms to produce more output C. increases exports D. induces an increase in consumption expenditure

d

An increase in income taxes​ _______, everything else remaining the same. A. sometimes increases the multiplier and sometimes decreases the multiplier B. makes the multiplier larger C. has no effect on the multiplier D. makes the multiplier smaller

d

An open market purchase​ _______ the monetary base. An open market sale​ _______ the monetary base. A. ​decreases; increases B. increases the quantity of​ currency, which​ increases; decreases the quantity of​ currency, which decreases C. ​increases; has no effect on D. ​increases; decreases

d

At equilibrium​ expenditure, aggregate planned expenditure​ _______ real GDP. A. exceeds but is moving toward B. is less than but is moving toward C. might exceed or be less than but is moving toward D. equals

d

Depository institutions minimize the cost of monitoring borrowers by​ _______. A. hiring collection agencies and using them when two payments on a loan are missed B. threatening and enforcing foreclosure on bad debts C. making loans only to households with income that falls within a specified range D. using specialized resources that have a much lower cost than what households would incur if they had to undertake the activity individually

d

Disoposable income is aggregate income minus taxes plus​ _____. A. transfer payments minus saving and minus consumption B. transfer payments minus consumption C. transfer payments minus saving D. transfer payments

d

During times of​ uncertainty, it might be necessary for a bank to hold large cash reserves and to have a large percentage of its assets purchased by its own capital because​ _______. A. it might be forced to make many​ high-risk loans B. the quantity of U.S. government Treasury bills available for purchase decreases C. people are more likely to withdraw cash from ATMs rather than to write checks D. its depositors may decide to make large withdrawals

d

Examples of monetary policy that decrease aggregate demand include​ ______. A. a decrease in taxes and a decrease in interest rates B. an increase in transfer payments and an increase in interest rates C. an increase in taxes and a decrease in the quantity of money D. a decrease in the quantity of money and an increase in interest rates

d

Fluctuations in autonomous expenditure bring​ ______ fluctuations in real GDP. A. opposing B. diminished C. equal D. magnified

d

If the desired reserve ratio and the currency drain ratio​ increase, the money multiplier​ _______. A. ​doesn't change B. increases C. might increase or​ decrease, but we​ don't know for sure D. decreases

d

In the long​ run, the money wage rate​ _______, short-run aggregate supply​ _______, and the economy returns to a​ full-employment equilibrium. A. ​falls; increases B. ​rises; increases C. ​falls; decreases D. ​rises; decreases

d

Starting from a​ full-employment equilibrium, a decrease in​ short-run aggregate supply​ _______ the price level and​ _______ potential GDP. A. ​increases; increases real GDP above B. ​decreases; decreases real GDP below C. ​decreases; increases real GDP above D. ​increases; decreases real GDP below

d

Suppose that the E.U. economy goes into an expansion. Explain the effect of the expansion on U.S. real GDP and unemployment in the short run. In the short​ run, U.S. real GDP​ _______. A. decreases and U.S. unemployment increases because U.S. imports from the European Union increase B. increases and U.S. unemployment increases because E.U. imports from the United States increase C. decreases and U.S. unemployment increases because U.S. imports from the European Union increase D. increases and U.S. unemployment decreases because E.U. imports from the United States increase

d

Suppose the Fed buys​ $50 million of government securities from the Bank of America. Do the​ Fed's total assets and total liabilities​ change? Do the Bank of​ America's total assets and total liabilities​ change? The​ Fed's total assets​ _______ and its total liabilities​ _______. A. increase by​ $50 million; do not change B. decrease by​ $50 million; increase by​ $50 million C. do not​ change; do not change D. increase by​ $50 million; increase by​ $50 million

d

The Federal Open Market Committee is the​ _______. A. ​policy-making committee of the Federal Reserve System that determines the U.S. exchange rate B. Senate committee to which the Federal Reserve chair reports​ semi-annually C. Congressional committee that makes monetary policy decisions D. main​ policy-making organ of the Federal Reserve System

d

The central bank of the United States performs many​ functions, one of which is that it​ _______. A.provides general banking services for businesses and individual citizens B.provides safety deposit boxes for citizens with assets over $ 200 million C.is responsible for paying all government employees D.is a public authority that regulates a nation's depository institutions

d

The defining feature of the Keynesian view of macroeconomics is that the economy is​ _______. A. that the quantity of money is the most significant influence on aggregate demand B. constantly bombarded by shocks that arise from the uneven pace of technological change C. ​self-regulating and always at full employment D. rarely at full employment

d

The gap between​ ______ is the output gap. When​ _____, the output gap is called an inflationary gap. A. the interest rate and the price​ level; real GDP exceeds potential GDP B. the price level and the​ cost; real GDP equals the interest rate C. real GDP and aggregate​ demand; real GDP equals potential GDP D. real GDP and potential​ GDP; real GDP exceeds potential GDP

d

The main functions of the Federal Open Market Committee are to​ _______. A. set the inflation rate and determine the monetary policy actions to be taken by the N.Y. Fed B. determine interest rates to be charged by commercial banks on personal loans and set the federal funds rate C. keep the inflation rate low and stable and minimize unemployment D. review the state of the economy and determine the monetary policy actions to be taken by the N.Y. Fed

d

The mainstream business cycle theory is that​ ______ grows at a steady rate while​ ______ grows at a fluctuating rate. Question content area bottom Part 1 A. aggregate​ demand; potential GDP B. ​short-run aggregate​ supply; potential GDP C. potential​ GDP; short-run aggregate supply D. potential​ GDP; aggregate demand

d

The monetary base is​ _______. _______ of the monetary base. A. the sum of currency and the reserves of depository​ institutions; The​ Fed's liabilities are the sources and the​ Fed's assets are the uses B. the total of all currency held in the banking​ system; The​ Fed's liabilities are the sources and the​ Fed's assets are the uses C. the sum of U.S. government securities and​ mortgage-backed securities held by the​ Fed; The assets that the Fed holds as U.S. government securities are the uses D. the sum of currency and the reserves of depository​ institutions; The​ Fed's assets are the sources and the​ Fed's liabilities as currency and bank reserves are the uses

d

The multiplier is greater than 1 because the change in autonomous expenditure leads to​ _______. A. less consumption expenditure B. more investment C. more saving D. more induced expenditure

d

The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to​ ______. A. maximize real GDP B. make inventories equal to their target levels C. minimize taxes and maximize transfer payments D. increase real GDP by a given amount

d

The prices of auto parts imported from China rise. This event​ _______ short-run aggregate supply and​ _______ long-run aggregate supply. A. does not​ change; does not change B. decreases​; decreases C. increases​; does not change D. decreases​; does not change

d

The two main official measures of money in the United States today are​ _______. The two main official measures of money in the United States​ _______ really money. A. currency and​ M2; are B. M2 and​ M3; are not C. M1 and​ M2; are not D. M1 and​ M2; are

d

The unemployment rate​ _______ its natural​ rate, and to return to the​ long-run equilibrium, the money wage rate begins to​ _______. A. falls​ below; fall B. rises​ above; rise C. rises​ above; fall D. falls​ below; rise

d

The velocity of circulation is the​ _____ number of times in a​ _____ that each dollar of money gets used to buy final goods and services. A. ​average; month B. ​total; day C. ​total; year D. ​average; year

d

The​ long-run historical evidence and international evidence show us that the relationship between money growth and the inflation rate​ _______. A. is​ non-existent, and the quantity theory of money which was accurate in the past is no longer applicable B. supports the quantity​ theory, and the money growth rate equals the inflation rate in the long run C. is an inverse relationship that does not correspond to the quantity theory D. supports the quantity​ theory, but the correlation is not perfect

d

What is the central bank of the United States and what functions does it​ perform? The central bank of the United States is the​ _______. A. Bank of the United States B. Bank of America C. Federal Reserve Bank of New York D. Federal Reserve System

d

When potential GDP​ increases, _______. A. we​ don't know what the effect is on​ long-run aggregate supply or​ short-run aggregate supply B. ​long-run aggregate supply increases but​ short-run aggregate supply does not change. The LAS curve shifts rightward and a movement occurs along the SAS curve C. ​long-run aggregate supply and​ short-run aggregate supply increase. A movement upward occurs along the LAS curve and along the SAS curve D. ​long-run aggregate supply and​ short-run aggregate supply increase. The LAS and the SAS curve shift rightward

d

When real GDP​ decreases, what occurs in the money​ market? When real GDP​ decreases, _______. A. there is a decrease in the quantity of money demanded. The opportunity cost of money increases B. there is an increase in the quantity of money demanded. The opportunity cost of money decreases C. the quantity of money decreases D. a decrease in the demand for money occurs

d

Which of the following statements illustrates monetary policy​? A. Some U.S. firms have scrapped outsourcing to China due to rising labor costs. B. The U.S. public​ debt-to-GDP ratio in 2011 was about 100 percent. C. The U.S. government has increased its spending to boost demand. D. The Fed has raised the federal funds rate by 0.3 percent.

d

depository institutions a. make profit according to how much federal reserve pays them b. make zero profit but receive compensation by the government because their services are so valuable c. make their profit by charging the government for their services d. make profit from the spread between the interest rate they pay on deposits and the interest rate they receive on loans

d

during periods of inflation, which function of money is most severely affected? a. unit of account b. medium of exchange c. means of payment d. store of value

d

in the very short term, planned investment ___when gdp changes and planned consumption expenditure ____ when gdp changes. a. changes, does not change b. changes;changes c. does not change;does not change d. does not change;changes

d

the consumer price index is a measure of the average prices paid by ____ for a fixed basket of consumer goods and services. a. all consumers b. urban wage earners c,. consumers living in cities with a population greater than 100,000 d. urban consumers

d

the federal reserve has ___ regional federal reserve banks and ___ members of the board of governors a. 7;7 b. 7;12 c. 12;12 d.12;7

d

the main policy making organ of the federal reserve system is the a. board of governors b. federal reserve bank presidence c. joint congressional committee on monetary policy d. federal open market committee

d

when the aggregate demand curve shifts, the steeper the SAS curve the _____ will be a change in the price level and the ______ will be the multiplier a. larger;larger b. smaller;larger c. smaller;smaller d. larger;smaller

d

​Cost-push inflation causes stagflation because it occurs when​ _______. A. the quantity of money decreases B. costs decrease C. the quantity of money increases D. costs increase

d

​Short-run macroeconomic equilibrium occurs when the quantity of​ _____ demanded equals the quantity of​ _____ supplied at the point of intersection of the​ _____ curve and the​ _____ curve. A. ​output; output; MD​; MS B. loanable​ funds; loanable​ funds; DLF​; SLF C. ​reserves; reserves; RD​; RS D. real​ GDP; real​ GDP; AD​; SAS

d

open market sale

decrease supply of reserves, federal funds rate increase

As the required reserve ratio increases, the money multiplier and money supply

falls

as interest rate rises, present value _______.

falls


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