Macro Final

Liabilities

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

$10,000

A commercial bank has demand deposit liabilities of $50,000 and a reserve ratio of 20 percent. What is the amount of required reserves?

aggregate demand decrease because net exports

If the dollar appreciates in value relative to foreign currencies

Federal Reserve System

The conduct of monetary policy in the United States is the main responsibility of the:

Government borrows in the money market, thus causing an increase in interest rates

The crowding-out effect arises when:

increases in government spending may reduce private investment

The crowding-out effect suggests that

Fiat money

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

Budget Deficit (If tax revenue= government spending and then G increases and/or taxes decrease, there will be a budget deficit)

The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a:

A full-employment, noninflationary level of total output

The fundamental objective of monetary policy is to assist the economy in achieving

GDP

The goal of expansionary fiscal policy is to increase:

The federal funds rate

The interest rate that banks charge one another for the loan of excess reserves is the:

$60 (C = Y at break even C =15+.75Y 15+.75Y=Y 15=.25Y 60=Y)

What is the break even level of income when C = 15 + .75Y?

0.9 (mps = 10/100 or 0.1 so mpc must be 0.9 since mpc + mps =1)

What is the marginal propensity to consume given the following information? Y: Income Saving $500 $80 $600 $90 $700 $100 $800 $110

time the need for the fiscal action is recognized and the time that the action is taken

administrative lag

Setting the Fed's monetary policy and directing the purchase and sale of government securities to change interest rates

the FOMC of the Federal Reserve System is primarily for:

asset to the depositor and a liability to the bank

A checkable or demand deposit at a commercial bank is an

10,000

A commercial bank has actual reserves of $50,000 and demand deposits of $200,000, and the required reserve ratio is 20%. The excess reserves of the bank are:

inflation

A decrease in aggregate demand in the Classical Range of the AS curve will reduce:

Economic growth would decrease and inflation would rise (stagflation)

A decrease in aggregate supply means:

Taxation and government spending

Fiscal policy is enacted through changes in:

0.4, 2.5

GDP C $240 $244 $250 $250 $260 $256 Refer to the above table. The MPS and the multiplier are, respectively:

$680 billion

GDP Consumption $600 $580 $640 $610 $680 $640 Refer to the above information. If investment was $20 billion, government purchases of goods and services were $20 billion, and and net exports were zero, then the equilibrium level of GDP would be:

14

How many years is the term of office for members appointed to serve on the Board of Governors of the Federal Reserve System?

People receive loans from their banks

Money is "created" when:

GDP will rise (imports will fall so NX will rise and so will GDP)

Other things constant, if domestic consumers purchase fewer foreign goods

$189 (C = 45 + .8(180))

Suppose consumers spend $45 even when they have no income and they spend 80 cents out of every extra dollar earned. How much will they spend when they earn $180?

Sell government securities in the open market and decrease government spending

Suppose the economy is at full employment with a high inflation rate. Which combination of policies is most likely to reduce the inflation rate?

The Fed

The Federal Funds Rate is the rate that banks pay for loans from:

12 districts

The Federal Reserve System is divided into

Reducing the discount rate

The Federal Reserve can increase aggregate demand by:

A GDP gap in a recession

The amount by which the full-employment level of GDP exceeds the equilibrium level of aggregate expenditures can best be described as:

Allow banks to increase their lending

The major purpose of the Federal Reserve buying government securities in open market operations is to

Open-market operations

The most frequently used monetary device for achieving price stability is

The reciprocal of the reserve ratio

The multiple by which the commercial banking system can expand the supply of money is equal to:

an increase in income tax rates

The multiplier effect will be reduced by

Real GDP

The purpose of an expansionary monetary policy is to increase:

Banks are vulnerable to "panics" or "bank runs."

What is one significant consequence of fractional reserve banking?

$40 (mps = 10/100 - 0.1 so mpc =0.9 760= a + .9(800) you can use any row to figure this out I knew C = 760 when Y = 800 because I knew S = 40 and C + S = Y a=40)

What is the amount of autonomous consumption spending given the following information? Y: Income Saving $500 $10 $600 $20 $700 $30 $800 $40

5 (1/mps 1/.2 = 5)

What is the amount of the spending multiplier given the following consumption function? C = 10+0.8Y

$300

What is the break even level of income given the following information? Y: Income Saving $500 $20 $600 $30 $700 $40 $800 $50

the inflation rate

When the Federal Reserve acts to tighten money and credit in the economy, it is trying to reduce:

gold

Which element is best for use as a commodity money according to the short video we watched about the periodic table?

Government issuance or sale of Treasury securities

A Federal budget deficit is financed by the:

Multiplying its demand deposit liabilities by the reserve ratio

A bank's required reserves can be calculated by:

Decrease in aggregate demand (C spending will fall when personal taxes increase so AD will also decrease since AD= C + I +G+ NX)

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

decreases the interest rate and increases aggregate demand

An increase in the monetary supply usually

interest rates

An increase in the money supply is likely to reduce

10,800

An individual deposits $12,000 in a commercial bank. The bank is required to hold 10 percent of all deposits on reserve at the regional Federal Reserve Bank. The deposit increases the loan capacity of the bank by:

$320 (S = -40 + .3(1,200))

Assume consumers save 30 cents out of every extra dollar and spend $40 independent of income earned. How much will they save when they earn $1,200?

Savings is 0

At the Break Even income level

Recognition lag

Compared to fiscal policy, monetary policy has a much shorter

Great Depression

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

Making it less expensive for commercial banks to borrow from central banks

Lowering the discount rate has the effect of

Wages and prices tend to be inflexible downward in the short run (New Keynesians say sticky wages and prices result in a horizontal AS curve in the short run)

Wage contracts, efficiency wages, and the minimum wage are explanations for why:

A medium of exchange

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

Decrease the money supply to shift the aggregate demand curve leftward

Which of the following is a monetary policy intended to rein in inflation?

interest rates

Which of the following is negatively related to Consumption spending?

6.67

if the required reserve ratio were 15 percent, the value of the monetary multiplier would be:

Are less than actual reserves

A bank is in the position to make loans when required reserves:

Stimulate the economy

A television report states: "The Federal Reserve will lower the discount rate for the fourth time this year." This report indicates that the Federal Reserve is most likely trying to