MACRO Econ final

Suppose the Northwestern Bank has excess reserves of $12,000 and checkable deposits of $125,000. If the reserve requirement is 20 percent, what are the bank's actual reserves?

$37,000

Refer to the table above. The size of the M2 money supply is:

$4,330

Refer to the graph above for a private closed economy. The equilibrium level of GDP in this economy is:

$450 billion

A depositor places $5,000 in cash in a commercial bank, and the reserve ratio is 20 percent; the bank sends the $5,000 to the Federal Reserve Bank. As a result, the reserves and excess reserves of the bank have been increased, respectively, by:

$5,000 and $4,000

Refer to the table above. The size of the M2 money supply is:

$5,899 billion

Refer to the above table. If the investment Ig in this economy is independent of income GDP, then a $10 increase in its net exports would increase its equilibrium real GDP by:

$50

Refer to the data given above. This bank has liabilities and net worth totaling:

$580 million

Refer to the above data. The equilibrium level of GDP in this private open economy is:

$600 billion

If the dollar appreciates in value relative to foreign currencies:

Aggregate demand decreases because net exports decrease

If the national incomes of our trading partners increase, then our:

Aggregate demand increases because net exports increase

Refer to the above graph. What combination would most likely cause a shift from AD1 to AD3?

An increase in taxes and a decrease in government spending

A checkable deposit at a commercial bank is a(n):

Asset to the depositor and a liability to the bank

When the Federal government cuts taxes and increases spending to stimulate the economy during a period of recession, such actions are design to be:

Countercyclical

Which of the following is not true about the use of a credit card?

Credit-card balances are part of M2, but not part of M1

If a government wants to pursue an expansionary fiscal policy, then a tax cut of a certain size will be more expansionary when the:

Economy's MPS is small

Saving is $15 billion at the $125 billion equilibrium level of output in a closed, private economy. Actual investment must be:

Equal to $15 billion

One major advantage of money serving as a medium of exchange is that it allows society to:

Escape the complications of barter

If Congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of a(n):

Expansionary fiscal policy

Net exports are negative when:

Imports exceed exports

The fractional reserve system of banking started when goldsmiths began:

Issuing paper receipts in excess of the amount of gold held

A bank has $2 million in checkable deposits. In the bank's balance sheet, this would be part of:

Liabilities

The claims of creditors of a bank against the bank's assets are called:

Liabilities

The expenditure multiplier concept of the aggregate-expenditures model:

Magnifies the shifts of the aggregate demand curve

When loans are repaid at commercial banks:

Money is destroyed

People can generally get the following items at their commercial banks, except

Money market mutual fund

Joe deposits $200 in currency into his checking account at a bank. This deposit is treated as:

No change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits

Refer to the graph above. Assume that the economy initially has a price level of P1 and output level Q1. If the government implements expansionary fiscal policy, and the full multiplier effect was felt, it would bring the economy to:

P1 and Q3

The use of a debit card is most similar to:

Paying with a check

The aggregate demand curve or schedule shows the relationship between the total demand for output and the:

Price level

A fall in labor costs will cause aggregate:

Supply to increase

Consumption is $141 billion, planned investment is $15 billion, and saving is $15 billion in a private, closed economy. At this level:

The economy is in equilibrium

Currency and checkable deposits are:

The major components of money supply M1

Which of the following serves as an automatic stabilizer in the economy?

The progressive income tax

When government spending is increased, the amount of the increase in aggregate demand primarily depends on:

The size of the multiplier

The economy is in a recession. The government enacts a policy to increase spending by $2 billion. The MPS is 0.2. What would be the full increase in real GDP from the change in government spending assuming that the aggregate supply curve is horizontal across the range of GDP being considered?

$10 billion

The marginal propensity to save is 0.2. Equilibrium GDP will decrease by $50 billion if aggregate expenditures schedule decrease by:

$10 billion

Refer to the table above. If the real rate of interest is 2%, then the equilibrium level of GDP will be:

$1200 billion

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75. Aggregate expenditures must have fallen by:

$15 billion

Refer to the data above. If a check for $20,000 is drawn and cleared against this bank, it will then have excess reserves of

$15,000

A bank has excess reserves of $5,000 and demand deposits of $50,000; the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, then this bank can lend a maximum of:

$2,500

If the MPC in an economy is 0.75 and aggregate expenditures increase by $5 billion, then equilibrium GDP will increase by:

$20 billion

Refer to the data given above. If the required reserve ratio is 10 percent, the bank has excess reserves of

$22,000

Refer to the table above. Suppose investment is $12 billion and the economy revises its saving plans so as to save $4 billion less at all levels of income. The new equilibrium GDP will be:

$290 billion

Refer to the above table. If planned investments were fixed at $16, taxes were zero, government purchases of goods and services were zero, and net exports were zero, then equilibrium real GDP would be $630 initially. If government purchases were then raised from $0 to $4, other things constant, then the equilibrium real GDP would become:

$650

In a private closed economy where MPC = 0.8, if consumers reduce their spending by $10 billion and firms cut investments by $5 billion, then equilibrium GDP will decrease by

$75 billion

If aggregate expenditures increase by $12 billion and equilibrium GDP consequently increases by $48 billion, then the marginal propensity to save in the economy must be:

0.25

Items 1. Money market mutual funds held by individuals 2. Savings deposits, including money market deposit accounts 3. Money market mutual funds held by businesses 4. Currency held by the public 5. Small time deposits 6. Checkable deposits Refer to the list above. The M2 money supply is composed of items:

1, 2, 4, 5, and 6

Use the following list to answer the question about the money supply. Items 1. Money market mutual funds held by individuals 2. Savings deposits, including money market deposit accounts 3. Money market mutual funds held by businesses 4. Currency held by the public 5. Small time deposits 6. Checkable deposits Refer to the list above. Which items are included in the M2 money supply, but not the M1 money supply?

1, 2, and 5

Which of the above factors best explain the downward slope of aggregate demand curve?

1, 3, and 8

Refer to the above graph for a private closed economy. The multiplier for the above economy is:

3

Which of the following fiscal policy changes would be the most contractionary?

A $10 billion increase in taxes and a $30 billion cut in government spending

Which of the following expansionary fiscal policy changes would be most favored by those economists who think that the government is too large and inefficient?

A $40 billion tax cut

Money is "created" when:

A bank grants a loan to a customer

The required-reserve ratio is equal to:

A commercial bank's required reserves divided by its checkable-deposit liabilities

The paper money or currency in the U.S. essentially represents:

A debt of the Federal Reserve System

Refer to the above graph. What combination would most likely cause a shift from AD1 to AD2?

A decrease in taxes and an increase in government spending

An asset's liquidity refers to its ability to be:

A means of payment

What function is money serving when you use it when you go shopping?

A medium of exchange

The following factors explain the inverse relationship between the price level and the total demand for output, except:

A substitution effect

If product prices were stated in terms of tobacco leaves, then tobacco leaves would be functioning primarily as:

A unit of account

What is one significant characteristic of fractional reserve banking?

Banks can create money through lending their reserves

The short-run aggregate supply curve:

Becomes steep at output levels above the full-employment output

The long-run aggregate supply analysis assumes that:

Both input and product prices are variable

Refer to the graph above. Automatic stability in this economy could be enhanced by:

Changing the tax system so that the tax line has a steeper slope

As of February 2013, more than half of the money supply (M1) was in the form of:

Checkable deposit

Which of the following would be considered to be the most liquid?

Checkable deposits

A bank's net worth is the:

Claims of its owners against the bank's assets

If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n)

Contractionary fiscal policy

The Federal backing for money in the United States comes from:

Controlling the money supply in order to keep the value of money relatively stable over time

Discretionary fiscal policy is often initiated on the advice of the:

Council of Economic Advisers

Refer to the data given above. If the reserve ratio is 10 percent and a check for $10,000 is drawn and cleared in favor of another bank, then the actual reserves of the bank above will:

Decrease $10,000

An increase in personal income tax rates will cause a(n):

Decrease (or shift left) in aggregate demand

A decrease in government spending will cause a(n):

Decrease in aggregate demand

The interest rate effect on aggregate demand indicates that a(n):

Decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending

When national income in other nations decreases, aggregate demand in our economy:

Decreases because our exports will decrease

The short-run aggregate supply curve shows the:

Direct relationship between the price level and real GDP produced

In the aggregate expenditures model, the consumption schedule is shown to be:

Directly related to real income GDP

The paper currencies of the U.S. are also called:

Federal Reserve notes

When the Federal government uses taxation and spending actions to stimulate the economy it is conducting

Fiscal policy

John Maynard Keynes expressed his ideas about the macroeconomy and attacked classical economics in his book, The:

General Theory of Employment, Interest, and Money

Injections into the income-expenditure stream include:

Government purchases and exports

John Maynard Keynes developed the aggregate expenditures model in order to understand the:

Great Depression

The immediate-short-run aggregate supply curve is:

Horizontal

An increase in productivity will:

Increase aggregate supply

Assume that the required reserve ratio is 20 percent. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the reserves at Bank A and Bank B?

Increase by $50,000 at Bank A, and decrease by $50,000 at Bank B

A decrease in interest rates caused by a change in the price level would cause a(n):

Increase in the quantity of real output demanded (or movement down along AD)

Which combination of fiscal policy actions would most likely offset each other?

Increase taxes and government spending

Henry deposits $2,000 in currency in the First Street Bank. Later that same day Jane Harris negotiates a loan for $5,400 at the same bank. After these transactions, the supply of money has:

Increased by $5,400

In the aggregate expenditure model, which of the following variables is assumed to be independent of real GDP?

Investment

The goal of expansionary fiscal policy is to increase:

Real GDP

The labels for the axes of an aggregate supply curve should be:

Real domestic output for the horizontal axis and price level for the vertical axis

Cash held by a bank in its vault is a part of the bank's:

Reserves

The foreign purchases effect on aggregate demand suggests that a:

Rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand

If the economy is to have significant built-in stability, then when real GDP increases, the tax revenues should:

Rise proportionately more than the change in GDP

As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system:

Serves as an automatic stabilizer for the economy

A bank's checkable deposits shrinks from $40 million to $33 million. What happens to its required reserves if the required reserve ratio is 3%?

They fall by about $0.2 million

The currency or money of the United States, like those of other countries, is:

Token money

The so-called "negative taxes" are better known as:

Transfer payments

Which of the following institutions does not provide checkable-deposit services to the general public?

U.S. Treasury

The long-run aggregate supply curve is:

Vertical