MACRO final

If required reserve ratio is 20 percent the simple deposit multiplier is

5

Which information about fiat money is false

Fiat money is backed by gold

Following a decrease in government spending, as the price level falls we would expect the level of interest rates to _____ and investment to _____.

decrease, increase

The rate of interest banks charge other banks for overnight loans of reserves is the

federal funds rate

If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account, then M1 will ________ and M2 will ________.

decrease, not change

If the Fed buys U.S. Treasury securities, then this

increases reserves, encourages banks to make more loans, and increases the money supply

To increase the money supply the Federal Reserve could

lower the discount rate

Why is the short run aggregate supply curve upward sloping?

menu costs make some prices sticky

If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries

the long run AS curve will shift to the left

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

the money supply and interest rates to pursue its economic objectives

What is an example of discretionary fiscal policy

the tax cuts passed by Congress in 2001 to combat the recession

Suppose Warren Buffet withdraws $1 million from his checking account at Chase Manhattan Bank. If the required reserve ratio is 20 percent, what is the maximum change in deposits in the banking system?

-5 million

Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be

11%

What is considered to be contractionary fiscal policy

Congress increases the income tax rate

Which of the following is a reason why we should consider the federal national debt a problem

If the debt drives up interest rates crowding out will occur

The statement "My iPhone is worth $700" represents money's function as

a unit of account

A central bank can help stop a bank panic by

acting as a lender of last resort

automatic stabilizers

changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action

Which of the following is not counted in M1

credit card balances

The M1 measure of the money supply equals

currency in circulation plus checking account deposits in banks

Which of the following is counted as a liability for a bank

customer deposits

Suppose the economy is at point b. A policy to restore full employment would be

decrease in government purchase

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in AD causes price expectations to

rise shifting the SRAS curve to the left

Which of the following Fed actions would both decrease the money supply

sell bonds and raise the reserve requirement

If rapid increases in oil prices caused price levels to increase and real GDP to decrease in the short run, the economy would experience

stagflation