Econ Final

Which of the following would cause the money demand curve to shift to the left?

a decrease in real GDP

According to the short - run Phillips curve, which of the following would result in low rates of unemployment?

a higher inflation rate

An increase in the interest rate causes

a movement up along the money demand curve

Contractionary monetary policy causes

aggregate demand to fall and the price level to fall

If the Fed pursues expansionary monetary policy

aggregate demand will rise, and the price level will rise

Which of the following is an appropriate discretionary fiscal policy if equilibrium real GDP falls below potential real GDP?

an increase in government purchases

If real GDP exceeded potential real GDP and inflation was increasing, which of the following would be an appropriate fiscal policy?

an increase in taxes

The increase in the amount the government collects in taxes when the economy expands and the decrease in the amount the government collects in taxes when the economy goes into a recession is an example of

automatic stabilizers

Which of the following is considered contractionary fiscal policy?

congress increases the income tax rate

An increase in real GDP

increases the buying and selling of goods and increases the demand for money as a medium of exchange

Which of the following would be considered a fiscal policy action?

A tax cut is designed to stimulate spending during a recession

Monetary policy refers to the actions the

Federal Reserve takes to manage the money supply and interest rates to pursue its economic objectives

Expansionary monetary policy refers to the ________________ to increase real GDP.

Federal Reserve's increasing the money supply and decreasing interest rates

Which of the following situations is one in which the Fed will potentially pursue expansionary monetary policy?

Potential GDP is forecasted to be higher than equilibrium GDP

In which of the following situations would the Fed conduct contractionary monetary policy?

The Fed is concerned that aggregate demand would continue to exceed the growth in potential GDP

Which of the following would be classified as fiscal policy?

The federal government cuts taxes to stimulate the economy

Which of the following is true?

The money market model is essentially a model of that determines the short term nominal rate of interest

What is the natural rate of unemployment?

The unemployment rate that exists when the economy is at potential GDP

To combat a recession with discretionary fiscal policy, Congress and the president should

decrease taxes to increase consumer disposable income

An increase in the money supply will

decrease the interest rate

An economic expansion tends to cause the federal budget deficit to __________ because tax revenues ____________ and government spending on transfer payments ___________.

decrease; rise; fall

The government purchases multiplier equals the change in​ ________ divided by the change in​ ________.

equilibrium real​ GDP; government purchases

Crowding out, following an increase in government spending, results from

higher interest rates and higher exchange rate

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ____________ and real GDP to be ______________.

higher; higher

During 1970 - 1997, the US federal government was

in deficit every year

Which of the following would be most likely to induce Congress and the president to conduct contractionary fiscal policy? A significant

increase in inflation

Increases in the price level

increase the quantity of money needed for buying and selling

An increase in the interest rate should _________________ the demand for dollars and the value of the dollar, and the net exports should ______________.

increase; decrease

A recession tends to cause the federal budget deficit to​ ________ because tax revenues​ ________ and government spending on transfer payments​ _________.

increase; fall; rise

Buying a house during a recession may be a good idea if your job is secure because the Federal Reserve often

lowers interest rates during recessions

If the Fed buys Treasury bills, this will shift the

money supply curve to the right

The crowding out of government spending by private spending will be greater the

more sensitive consumption, investment, and net exports are to changes in interest rates

The money demand curve has a

negative slope because an increase in the interest rate decreases the quantity of money demanded

According to the short - run Phillips curve, the unemployment rate and the inflation rate are

negatively related

Government deficits tend to increase during

periods of war and recession

The Federal Reserve's four goals of monetary policy are

price​ stability, high​ employment, economic​ growth, and stability of financial markets and institutions.

Crowding out refers to a decline in​ ________ as a result of an increase in​ ________.

private expenditures; government purchases

The ability of the Federal Reserve to use monetary policy to affect economic variables such as real GDP ultimately depends upon its ability to affect

real interest rates

If the Fed raises the interest rate, this will __________ inflation and __________ real GDP in the short run

reduce; lower

During recessions, government expenditure automatically

rises because of programs such as unemployment insurance and medicaid

The Fed can increase the federal funds rate by

selling Treasury bills, which decreases bank reserves

Fiscal policy is defined as changes in federal _______________ and _________________ to achieve macroeconomics objectives such as price stability, high rates of economic growth, and high employment

taxes; expenditures

The curve showing the short-run relationship between the unemployment rate and the inflation rate is called

the Phillips curve

The monetary policy target the federal reserve focuses primarily on today is

the interest rate

Monetary policy refers to the actions the Federal Reserve takes to manage

the money supply and interest rates to pursue its economic objectives.

The Federal​ Reserve's two main monetary policy targets are

the money supply and interest rates.

If the Fed pursues expansionary monetary policy then

the money supply with increase, interest rates will fall and GDP will rise

The federal government debt equals

the total value of US treasury bonds outstanding

The largest and fastest - growing category of federal government expenditures is

transfer payments

If the Fed's policy is contractionary, it will

use open market operations to sell Treasury bills.

in the long run, the Phillips curve is a ____________ at _________________

vertical line; the natural rate of unemployment

An increase in the sensitivity of private spending to changes in the interest rate ___________ the government purchases multiplier

will decrease

Automatic stabilizers refer to

government spending and taxes that automatically increase or decrease along with the business cycle

From the 1960s to 2014, transfer payments

have risen from 25 % to about 48% of federal government expenditures

Expansionary fiscal policy will

shift the aggregate demand curve to the right

Historically, the largest US federal budget deficits as a percentage of GDP in the 20th century occurred during

WWI and WWII

If the federal government's expenditures are less than its tax revenues, then

a budget surplus results

The tax multiplier equals the change in​ ________ divided by the change in​ ________

equilibrium real​ GDP; taxes

For purposes of monetary policy, the Federal Reserve has targeted the interest rate known as the

federal funds rate

The interest rate that banks charge other banks for overnight loans is

federal funds rate

Fiscal policy refers to changes in

federal taxes and purchases that are intended to achieve macroeconomic policy objectives

The federal government debt as a percentage of GDP fell

from 1998 - 2001

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

government purchases

Expansionary fiscal involves

increasing government purchases or decreasing taxes

The largest source of federal government revenue in 2014 was

individual income taxes

The three categories of federal government expenditures, in addition to government purchases are

interest on the national debt, grants to state and local governments, and transfer payments

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ___________ and real GDP to be _____________.

lower; lower