Econ Test 3 Part 2

If business taxes increase, the demand for loanable funds curve will shift up or down? and the new equilibrium point will be higher or lower?

Down, Lower

___________ government spending, ___________ transfer payments, and ________ taxes are all examples of expansionary fiscal policy

Increasing, increasing, lowering

M2 is ______ in dollar value than M1, it also contains _______ liquid assets?

Larger, Less Liquid

M2=

M1+ savings deposits+money market deposit accounts+small denomination time deposits+shares in retail money market mutual funds net of retirement accounts

mT formula?

MPC ------- 1-MPC

Federal spending that is authorized by permanent (mandatory) laws and does not go through the annual appropriation process is called _________ spending?

Mandatory

How to determine the face value of a bond?

Yearly Payment ----------------- Interest Rate

When the interest rate is high, businesses will not want to ______

borrow loanable funds

________ interest rates make consumers and businesses less likely to borrow for purchases and investment

higher

Which of the following categories is an example of discretionary spending?

hurricane relief funds social security, medicare, food stamps are all in Mandatory Fiscal Policy

Any policy that provides incentives for households to SAVE will _______ the supply for loanable funds

increase

Automatic stabilizers include all of the following except?

increased research and development

The 768$ billion stimulus package passed in the U.S. in 2009 focused more on spending than on taxes partly because?

increased spending leads to a larger increase in GDP than the same reduction in taxes

The largest source of federal government revenues is?

individual income taxes

Discretionary spending includes:

national defense, transportation, science education, environmental protection

mG formula?

1 -------- 1-MPC

Money must function as what three things?

1. Medium of Exchange 2. Unit of Account (allows us to compare values of two different commodities) 3. Store of Value (because it has a high level of liquidity)(allows us to save)

Under a cyclically balanced budget, a government should _____ when the economy is growing, and _____ when the GDP is declining?

raise taxes, raise spending

Mandatory spending includes:

social security, medicare, and interest on the national debt

As the real interest rate falls:

the quantity demanded of loanable funds rises

For a commodity to be used as money:

1. its value must be easy to determine 2. must be divisible 3. durable 4. widely accepted

Rank the types of assets from most liquid to least liquid:

Currency(M1), Demand Deposits(M1), Money Market Mutual Funds(M2)

If households save a larger portion of their income because they fear job loss due to recession, the loanable funds supply curve will shift to the left or right (increase or decrease?) and the new equilibrium point will be at a higher or lower interest rate?

Shift to the right, with a lower interest rate equilibrium

Serving as a ________ is a function of money that gives us a yardstick by which we can measure and compare the values of a wide variety of goods and services

Unit of Account

Money is the most liquid asset because it requires no ________

conversion

The most common short-term loan is in the form of?

credit card debt

As interests rates increase, investment ________?

decreases (the Crowding Out Effect)

In an Annually Balanced budget, revenues (Tnet) and spending (G) must be _______ each year?

equal

Contractionary fiscal policy is typically used to?

fight inflation stemming from an overheated economy

Expansionary fiscal policies could?

move the economy to full employment