Macro Final Exam

Stealth bank holds deposits of $200 million. It holds reserves of $15 million. It has purchased government bonds worth $75 million. The current value of its loans, if sold at market value, is $130 million. What is the value of the Stealth bank's liabilities?

$200 million

Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal?

$270 million

Stealth bank holds deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. The current market value of the bank's loans is $400 million. What is the value of the bank's total liabilities?

$600 million

Stealth bank has deposits of $300 million. It holds reserves of $20 million and has purchased government bonds worth $300 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal?

$620 million

Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The banks loans, if sold at current market value, would be worth $600 million. What is the total value of Stealth bank's assets?

$970 million

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

When the central bank lowers the reserve requirement on deposits:

. the money supply increases and interest rates decrease.

In 2009, the U.S. government spent $1.4 trillion more than it collected in taxes. This deficit was about:

10% of the size of the U.S. GDP in 2009.

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

12

Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal?

$510 million

Which of the following would function as a store value, and also provide a medium of exchange and unit of account

An estate

Omitted in a barter transaction

Money

services society in 3 functions: medium of exchange, unit of account, and store of value

Money

What do goods like gasoline, tobacco, and alcohol typically share in common?

They are all subject to government excise taxes.

are included in the aggregate amount of MI money currently in circulation

Travelers check

Which of the following is considered to be a relatively weak tool of monetary policy?

altering the discount rate

The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.

an expansionary fiscal policy; an increase in government spending

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.

When the central bank decides to increase the discount rate, the:

interest rates increase.

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.

proportional tax

If Brent uses his credit card to purchase a new television, then the money to pay the retailer is taken from:

the credit card company's M1 funds

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

the money supply decreases.

When inflation begins to climb to unacceptable levels in the economy, the government should:

use contractionary fiscal policy to shift aggregate demand to the right.

A government annually allocates $5 billion of its total tax revenue to weather related disaster relief, $21 billion to healthcare and $11 billion to education. If the government's quarterly tax revenue is $33 billion, what percentage of its budget is allocated annually to healthcare?

15.90%

A government collects $700 billion annually in tax revenue. Each year it allocates $70 billion to the justice system and $130 billion for its own administrative costs. What percentage of annual tax revenue is allocated to these two categories of government spending?

28.57%

If nominal GDP is 2700 and the money supply is 900, what is velocity?

3

If GDP is 2400 and the money supply is 600, then what is the velocity?

4

Stealth bank has deposits of $350 million. It holds reserves of $30 million and government bonds worth $70 million. If the bank sells its loans at market value of $400 million, what will its total assets equal?

500 million

If GDP is 1800 and the money supply is 300, then what is the velocity?

6

A government collects $70 billion quarterly in tax revenue. Each year it allocates $15 billion to the justice system and $29 billion for the administrative costs. What percentage of its total annual tax revenue is left for allocation to the remaining categories of government spending?

84.29%

Describes a situation in which 2 people each want to exchange some good or service that the other can provide

A double coincidence of wants

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

Annual inflationary loss of buying power

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

Automatic stabilizers

Which of the following institutions determines the quantity of money in the economy as its most important task?

Central Bank

is the institution designed to control the quantity of money in the economy and also to oversee the:

Central Bank; safety and stability of the banking system.

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

Her M1 funds

Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?

M1

Which category of the money supply would you be contributing to if you invest in money market funds

M2

If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system?

Medium of exchange

In 2010, Tara use 50,000.00 from funds she had invested in certificates of deposit as a down payment to buy a house.

Medium of exchange

Is completely inadequate mechanism, in a modern advanced economy

Money: to use as a unit of account

Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result?

Northern's loan assets increase by $30 million

In uncertain economic times, serves as a way of preservice economic value that can be spent or consumer in the future

Owning gold

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

Reserves

If Sarah uses her smart card to purchase movies over the internet, then the money to pay the retailer will come from:

Sarah's M1 funds

If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be:

a budget deficit.

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

a contractionary monetary policy.

. If the economy is in recession with high unemployment and output below potential GDP, then __________________ would cause the economy to return to its potential GDP?

a loose monetary policy

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

aggregate demand curve will shift to the right.

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

automatic stabilizers will decrease government spending and increase tax revenue.

The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely:

borrow for the short term from the central bank.

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

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

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.

Atlantic Bank is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond?

by increasing its reserves

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.

contractionary

The central bank uses a ____________________ monetary policy to offset business related economic contractions and expansions?

contractionary

In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________.

corporate profits

Which of the following would be classified in the M1 category of the money supply

demand deposists

With respect to measuring the money supply, which of the following terms describes a checking account?

demand deposits

If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied.

double coincidence of wants

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, ______________________ always has the effect of stimulating the economy in the short run.

expansionary monetary policy

. A ______________________ means that government spending and taxes are equal.

fiscal budget

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

fiscal policies

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will:

follow tight monetary policy.

When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is:

following a loose monetary policy.

When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is:

following an expansionary monetary policy.

Central bank policy requires all banks to hold 10% of deposits as reserves. Pacific Bank policy prevents it from holding excess reserves. Suppose banks cannot trade any of the bonds they already have. If the central bank decides to lower the reserve requirement to 9%, which of the following will result?

increase of $1 million in Pacific's loan assets

If the economy is at equilibrium as shown in the diagram above, then a contractionary monetary policy will

increase unemployment, but have little effect on inflation.

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

it negatively affects expansionary monetary policy.

In modern economies, credit cards are a _______ because of their wide acceptances as a method of payment for both goods and services

medium of exchange

If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

progressive

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

A central bank that desires to reduce the quantity of money in the economy can:

raise the reserve requirement.

If South Dakota's governor reports a budget surplus in 2011, that state government likely:

received more in taxes than it spent in that year.

If the economy is at equilibrium as shown in the diagram above, then an expansionary monetary policy will:

reduce both unemployment and inflation.

8. When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________.

regressive

If government tax policy requires Peter to pay $15,000 in tax 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:

regressive

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

shorter than

When a country's economy is producing at a level that exceeds its potential GDP, the standardized employment budget will show a __________________ than the actual budget.

smaller deficit

Lance paid 175,000 for his house in 2003 and sold it for 325,000 in 2006. What function did the house serve during the lance owned it

store of value

The central bank requires Southern to hold 10% of deposits as reserves. Southern Bank's policy prohibits it from holding excess reserves. If the central bank sells $25 million in bonds to Southern Bank which of the following will result?

the money supply in the economy decreases

If the economy is producing less than its potential GDP, _____________________ will show a larger deficit than the actual budget.

the standardized employment budget

The money multiplier is equal to the _______________ in the economy divided by the original _________________. *write down

total money; quantity of money

In macroeconomics, a _______ describes the common way in which market values are measured in an economy

unit of account