Economics

If nominal GDP is 3600 and the money supply is 300, what is the velocity?

12

A government annually collects $320 billion in tax revenue and allocates $42 billion to education spending. What percentage of this government's budget is spent on education?

13.12%

The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 5% of the deposits as reserves. What is the money multiplier in this economy?

20

If the required reserve ratio is 20%, what is the maximum amount of money that could be created by a new $1000 deposit?

$4000

The expenditure multiplier

Will generally be larger for government spending than tax cuts.

Which of the following is a valid criticism of the use of money as a store of value in modern economies?

annual inflationary loss of buying power

If an economy moves into a recession, causing that country to produce less than potential GDP, then:

automatic stabilizers will cause tax revenue to decrease and government spending to increase.

Lags that impact fiscal policy include all of the following except:

decision lag

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?

reserve requirements

The time lag for monetary policy is typically ________________ the time lag for fiscal policy.

shorter than

Which of the following is NOT a policy tool of the Federal Reserve?

taxes

The quantitative easing policies adopted by the Federal Reserve are usually thought of as:

temporary emergency measures.

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.

Automatic stabilizers

____________________________ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect.

Long and variable time lags

The social security tax is 6.2% on employees' income up to $128,400. This tax is

Regressive

___________are funds that the bank keeps on hand that are not loaned out or invested in bonds.

Reserves

Which of the following institutions oversees the safety and stability of the U.S. banking system?

The Federal Reserve

When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following:

a contractionary monetary policy.

In macroeconomics, ___________________________ describes a situation in which two people each want to exchange some good or service that the other can provide.

a double coincidence of wants

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the

aggregate demand curve will shift to the right.

If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, then:

both the money multiplier and the supply of money in the economy will increase.

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year.

budget deficit

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:

budget surplus.

A central bank that wants to increase the quantity of money in the economy will:

buy bonds in open market operations.

If the unemployment rate is 9.5% and the inflation rate is 0.5%, the Fed will most likely:

buy bonds.

How are the specific interest rates for the lending and borrowing markets determined?

by the forces of supply and demand

What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?

discount rate

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?

expansionary

Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________.

expansionary fiscal policy; lead to a budget deficit

Regardless of the outcome in the long run, ______________________ has the effect of stimulating the economy in the short run.

expansionary monetary policy

Contractionary fiscal policy is typically used to:

fight inflation stemming from an overheated economy.

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policies

A reduction in government borrowing can:

give private investment an opportunity to expand.

If Evelyn uses her debit card to buy a computer, then the money to pay the retailer will come from:

her M1 funds.

A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment.

higher interest rate

If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over half the households in the country pay more in payroll taxes than in income taxes?

income tax is a progressive tax

If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase or decrease

Which of the following is not a monetary policy lag?

interest rate lag

When banks hold excess reserves because they don't see good lending opportunities:

it negatively affects expansionary monetary policy.

Banks create money by

making loans

In 2010, Ava used $30,000.00 from funds she had invested in certificates of deposit as a down payment to buy a house. What function did this portion of her investments serve when she made the down payment?

medium of exchange.

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.

progressive tax

If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

proportional

If short-run equilibrium output equals 50,000 and full employment output equals 60,000, then this economy has a(n) __________ gap that can be closed by _________.

recessionary; increasing government purchases

If government tax policy requires Peter to pay $30,000 in tax on annual income of $200,000 and Paul to pay $20,000 in tax on annual income of $100,000, then the tax policy is:

regressive

Which measure is NOT a way the government can influence aggregate demand through fiscal policy?

regulation on businesses

If Canada's economy moves into an expansion and its economy is producing more than potential GDP, then:

the concern is that inflation will get too high.

If the Federal Reserve decides to increase the money supply:

the federal funds rate will fall.

When the central bank decides it will sell bonds using open market operations:

the money supply decreases.

When increasing oil prices cause aggregate supply to shift to the left, then:

unemployment and inflation increase.