Macroecon Exam 3

Bank A has $100 million in deposits, $15 million in required reserves, and $85 million in loans. Bank A's reserve ratio is: A.15%. B.10%. C.75%. D.20%.

A. 15%

(Figure: Aggregate Demand) Point A on this aggregate demand curve represents a real GDP growth rate of: A.5%. B.2%. C.3%. D.7%.

A. 5%

Reserves held by banks are mainly held in the form of: A.electronic claims. B.currency. C.checkable deposits. D.savings accounts.

A. electronic claims

If the exchange rate between the U.S. dollar and the euro is $1 for €0.75, then the price of €1 is: A.$1.33. B.$1. C.$1.75. D.$0.75.

A.$1.33.

Which of the following transactions can be classified as foreign direct investment for the United States? A.A Beijing antique dealer opens a store in downtown New York City. B.A Bangladeshi-American purchases a home in Dhaka, Bangladesh. C.The purchase of a Maserati GranTurismo from a Maserati dealer in New Jersey. D.A Korean businessman, living in South Korea, purchases stock on the NYSE.

A.A Beijing antique dealer opens a store in downtown New York City.

Ben Bernanke was _____ during the financial crisis of 2008. A.Chairman of the Federal Reserve B.Vice President of the United States C.Chairman of the President's Council of Economic Advisors D.Secretary of the U.S. Treasury

A.Chairman of the Federal Reserve

Which statement is TRUE regarding the effects of monetary policy when a real shock occurs? A.Monetary policy cannot simultaneously achieve a high real growth rate and lower the inflation rate. B.Monetary policy can be used only to change the inflation rate, but not the real growth rate. C.Monetary policy can always be used to simultaneously achieve a high real growth rate and lower the inflation rate. D.Monetary policy can be used only to change the real growth rate, but not the inflation rate.

A.Monetary policy cannot simultaneously achieve a high real growth rate and lower the inflation rate.

If the economy is hit by a negative real shock that reduces real GDP growth below its long-run potential rate, which of the following is the appropriate monetary policy to move real GDP growth back to the long-run rate without raising inflation? A.No monetary policy can achieve this goal. B.Increase the growth rate of the money supply. C.Keep the growth rate of the money supply constant while lowering interest rates. D.Decrease the growth rate of the money supply.

A.No monetary policy can achieve this goal.

When an economy is adjusting to a recent reduction in the money supply, what is a likely consequence? A.Unemployment is high. B.Inflation remains high. C.Interest rates continue to rise. D.Growth stays positive.

A.Unemployment is high.

If wages are not as flexible as prices in the AD-AS model, an increase in money growth will lead to: A.an increase in inflation and in the profits of firms. B.no change in inflation, but a fall in the profits of firms. C.an increase in inflation and a rise in real long-run GDP growth. D.an increase in inflation, but no rise in real short-run GDP growth

A.an increase in inflation and in the profits of firms.

Which could be sources of funding for a government that wants to increase government expenditures? A.both taxes and borrowing B.borrowing only C.neither taxes nor borrowing D.taxes only

A.both taxes and borrowing

Portfolio investment takes place in the United States when foreigners: A.buy U.S. stocks and bonds. B.buy U.S. exports. C.construct new business plants in the United States. D.shift bank deposits into the United States. from other countries.

A.buy U.S. stocks and bonds.

With a floating exchange rate, an increase in the U.S. interest rate will cause: A.capital to flow into the United States, an increase in the demand for dollars, and an appreciation of the dollar. B.capital to flow into the United States. C.an increase in the demand for dollars. D.an appreciation of the dollar.

A.capital to flow into the United States, an increase in the demand for dollars, and an appreciation of the dollar.

The _____ is the sum of the balance of trade, net income on capital held abroad, and net transfer payments. A.current account B.balance of payment C.capital account D.national account

A.current account

As the recession continued in early 2009, consumer confidence most likely: A.decreased. B.became too difficult to calculate accurately. C.remained constant. D.increased.

A.decreased.

When countries have severe debt problems: A.expansionary fiscal policy can reduce real growth. B.fiscal policy is an especially good idea. C.they can continue to borrow forever without any adverse consequences. D.it makes no difference for fiscal policy.

A.expansionary fiscal policy can reduce real growth.

In the short run, an increase in the money supply tends to increase employment because: A.exports only increase. B.both exports and imports increase. C.imports only increase. D.government spending increases.

A.exports only increase.

The Federal Reserve is the: A.federal government's bank, central bank, and banker's bank in the United States. B.banker's bank in the United States. C.federal government's bank. D.U.S. central bank.

A.federal government's bank, central bank, and banker's bank in the United States.

The disinflation experiment reduced inflation in the United States, but at the cost of: A.high unemployment. B.an increase in the long-run growth rate of the economy. C.high inflation. D.deflation.

A.high unemployment

The money multiplier is greater than one because banks: A.hold only a fraction of deposits as reserves. B.hold the entire amount of deposits as reserves. C.do not lend any of deposits out as loans. D.borrow loans from the Federal Reserve.

A.hold only a fraction of deposits as reserves.

Tight monetary policy results in a long period of disinflation and high unemployment if: A.nominal wages are sticky. B.prices are flexible. C.market confidence is high. D.the monetary policy is credible.

A.nominal wages are sticky.

Many economists blame the severity of the Great Depression on: A.poor monetary policy conducted by the Federal Reserve. B.the unwillingness of the federal government to increase spending. C.the stock market crash of 1929. D.overinvestment in capital.

A.poor monetary policy conducted by the Federal Reserve.

The short-run aggregate supply curve shows the _____ relationship between the inflation rate and real growth during the period when prices and wages are _____. A.positive; sticky B.positive; flexible C.negative; flexible D.negative; sticky

A.positive; sticky

Suppose the federal government gives taxpayers a tax rebate financed by borrowing. If taxpayers use the tax rebate to pay off their debts, total spending will: A.remain unchanged. B.decrease. C.increase. D.first increase and then decrease.

A.remain unchanged.

For a given aggregate demand curve, the specified rate of spending growth is the growth rate of money: A.supply plus the growth in velocity. B.demand plus the growth in velocity. C.demand minus the rate of growth in velocity. D.supply minus the rate of growth in velocity.

A.supply plus the growth in velocity.

When the Federal Reserve conducts monetary policy, the Federal Reserve usually focuses on: A.the Federal Funds rate. B.the discount rate. C.M2. D.M1.

A.the Federal Funds rate.

Since people will always come to expect the actual inflation rate in the long run, the expected inflation rate is found graphically where the: A.LRAS intersects the horizontal axis. B.SRAS curve intersects the LRAS curve. C.AD curve intersects the LRAS curve. D.AD curve intersects the SRAS curve.

B. SRAS curve intersects the LRAS curve

Suppose the Fed carries out an open market purchase and credits the account of a bank by $160,000. Further suppose that the reserve ratio (RR) is 10%. By how much is the money supply expected to change? A.$1.76 million B.$1.6 million C.$16 million D.$160,000

B.$1.6 million

Which of the following explains why a budget deficit can cause a trade deficit? A.An increase in the budget deficit lowers domestic interest rates, resulting in a current account deficit and a depreciation of the currency. B.An increase in the budget deficit raises domestic interest rates, resulting in a capital account surplus and an appreciation of the currency. C.An increase in the budget deficit raises domestic interest rates, resulting in a current account surplus and an appreciation of its currency. D.An increase in the budget deficit lowers domestic interest rates, resulting in a capital account deficit and a depreciation of the currency.

B.An increase in the budget deficit raises domestic interest rates, resulting in a capital account surplus and an appreciation of the currency.

How do budget deficits lead to trade deficits? A.Budget deficits lead to higher interest rates, which lead to net capital outflow, which leads to currency appreciation, thus reducing net exports. B.Budget deficits lead to higher interest rates, which lead to net capital inflow, which leads to currency appreciation, thus reducing net exports. C.Budget deficits lead to higher interest rates, which lead to net capital inflow, which leads to currency depreciation, thus reducing net exports. D.Budget deficits lead to lower interest rates, which lead to net capital inflow, which leads to currency appreciation, thus reducing net exports.

B.Budget deficits lead to higher interest rates, which lead to net capital inflow, which leads to currency appreciation, thus reducing net exports.

What happened to the price level between 1929 and 1932? A.Inflation hovered around 5%. B.Deflation reached 10%. C.It did not change. D.Inflation reached 20%.

B.Deflation reached 10%

In the United States, federal government expenditures must be approved by the: A.House of Representatives. B.House of Representatives, the Senate, and the president of the United States. C.Senate. D.president of the United States.

B.House of Representatives, the Senate, and the president of the United States.

Which of the following is NOT a constraint on trade that prevents prices from being fully equalized across borders? A.Governments may tax or otherwise restrict trade to an extent that hinders market exchange. B.The qualities of goods sold in different countries vary. C.Some goods cannot be shipped at all. D.The costs of transportation for some goods can be significant.

B.The qualities of goods sold in different countries vary.

When the Fed responds to a negative spending shock by increasing the money supply, it is using: A.a policy rule. B.a discretionary policy. C.its political power. D.its credibility.

B.a discretionary policy

The possibility that the failure of one bank affects the performance of other banks is called: A.moral hazard. B.a liquidity crisis. C.systemic risk. D.credit risk.

B.a liquidity crisis.

President Obama's fiscal policy response to the 2008 recession involved changes in: A.neither government spending nor taxation. B.both taxation and government spending. C.taxation only. D.government spending only.

B.both taxation and government spending.

The capital account measures: A.net income on capital held abroad and net transfer payment. B.changes in foreign ownership of domestic assets. C.how the value of a country's exports exceeds the value of its imports. D.the economic transactions between residents of one country and residents of the rest of the world.

B.changes in foreign ownership of domestic assets.

One way the government can use fiscal policy to fight a recession is to: A.reduce welfare subsidies. B.cut taxes. C.spend less money. D.increase Social Security payments.

B.cut taxes.

To reduce inflation in response to a negative real shock, the Federal Reserve would: A.increase the money growth rate, which would lower both the inflation rate and economic growth rate. B.decrease the money growth rate, which would lower both the inflation rate and economic growth rate. C.decrease the money growth rate, which would increase both the inflation rate and economic growth rate. D.increase the money growth rate, which would increase both the inflation rate and economic growth rate.

B.decrease the money growth rate, which would lower both the inflation rate and economic growth rate.

In the short run, a decrease in consumption growth will cause the real GDP growth to: A.increase. B.decrease. C.remain unchanged. D.become unpredictable.

B.decrease.

An increase in _____ will shift the SRAS curve. A.both actual inflation and expected inflation B.expected inflation, but not actual inflation C.neither actual inflation nor expected inflation D.actual inflation, but not expected inflation

B.expected inflation, but not actual inflation

To reduce the money supply in the economy, the Fed would: A.carry out open market sales and/or lower the discount rate. B.increase the discount rate. C.carry out open market purchases and/or lower the discount rate. D.carry out open market purchases.

B.increase the discount rate.

As a result of a positive shock to C: A.inflation increases and output growth decreases in the short run, but in the long run they return to the rates before the shock. B.inflation and output growth increase in the short run, but in the long run they return to the rates before the shock. C.inflation and output growth increase in both the short run and the long run. D.inflation and output growth decrease in the short run, but in the long run they return to the rates before the shock.

B.inflation and output growth increase in the short run, but in the long run they return to the rates before the shock.

Fiscal policy: A.is the decrease in private spending that occurs when government increases spending. B.is federal government policy on taxes, spending, and borrowing that is designed to influence business fluctuations. C.occurs when people see that lower taxes today means higher taxes in the future, so instead of spending their tax cut they save it to pay future taxes. D.is central bank policy on the monetary base, interest rates, and bank reserves that is designed to influence business fluctuations.

B.is federal government policy on taxes, spending, and borrowing that is designed to influence business fluctuations.

Ricardian equivalence: A.does not occur when a political administration is set to change. B.is less significant when consumers deem tax cuts or rebates as permanent. C.has not occurred in the United States. D.will occur more when consumers practice consumption smoothing.

B.is less significant when consumers deem tax cuts or rebates as permanent.

Disinflation in the 1980s was a result of: A.leftward shifts in the aggregate supply curve due to sticky wages and prices. B.leftward shifts in the aggregate demand curve due to money supply reductions. C.leftward shifts in the LRAS curve due to negative real shocks. D.rightward shifts in the LRAS curve due to positive real shocks.

B.leftward shifts in the aggregate demand curve due to money supply reductions.

When banks take on too much risk with the hope that the Fed will eventually bail them out, a condition of _____ exists. A.a solvency crisis B.moral hazard C.systemic risk D.liquidity risk

B.moral hazard

All else held constant, an increase in U.S. exports will cause the U.S. current account to: A.become more volatile. B.move in a positive direction. C.move in a negative direction. D.remain unchanged.

B.move in a positive direction.

Sustained inflation: A.can occur as a result of changes in . B.requires ongoing increases in the money supply. C.can occur as a result of changes in . D.can never occur.

B.requires ongoing increases in the money supply.

A decrease in spending growth will cause the economy's aggregate demand curve to: A.shift to the right. B.shift to the left. C.become flatter. D.become steeper.

B.shift to the left.

Fiscal policy is MOST effective in keeping both inflation and real growth stable when there is a: A.change in expected inflation that shifts the SRAS curve. B.shock to aggregate demand. C.real shock. D.shock to the LRAS curve.

B.shock to aggregate demand.

Open market operations refer to: A.decisions by the Fed to increase or decrease the money multiplier. B.the buying and selling of government bonds by the Fed. C.decisions by the Fed to raise or lower interest rates. D.the buying and selling of stocks in the stock market.

B.the buying and selling of government bonds by the Fed.

Fiscal policy is MOST effective if: A.most resources are fully employed. B.the economy is hit by a shock to aggregate demand. C.nominal wages and prices are totally flexible. D.taxpayers care about how fiscal policy is financed.

B.the economy is hit by a shock to aggregate demand.

If the Fed credits Alex's checking account with $8,000 and Alex's bank decides to keep the entire $8,000 in the form of reserves instead of lending it out, how much does the money supply increase? A.$1,000 B.$64,000 C.$8,000 D.$0

C. $8,000

According to the AD-AS model, if the economy is initially at its long-run potential growth rate, then a temporary increase in the growth rate of investment spending will cause: A.an increase in the real growth rate in the long run. B.no effect on real growth rate or inflation in the short run. C.an increase in both the inflation and real growth rates in the short run. D.an increase in the inflation rate in the long run.

C. an increase in both the inflation and real growth rates in the short run.

An economy in which the central bank overstimulates aggregate demand will suffer from: A.deflation. B.unemployment. C.inflation. D.increases in money supply.

C. inflation

Which of the following best describes the conditions during the Great Depression? A.Real GDP growth was high while inflation was negative. B.Real GDP growth was negative while inflation was very high. C.Both real GDP growth and inflation were negative. D.Both real GDP growth and inflation were historically high.

C.Both real GDP growth and inflation were negative

Which of the following would be recorded as a debit in the U.S. current account? A.United States exports $5 million in corn to Canada. B.American citizens go to sub-Saharan Africa to teach reading to young students. C.British financial investments in the United States pay higher dividends. D.The United States buys $1 million in British government bonds.

C.British financial investments in the United States pay higher dividends

____ and _____ are some of the most important aggregate demand shifters, and _____ is one of the Federal Reserve's most powerful tools. A.Interest rate; exchange rate; currency control B.Money; resources; the money supply C.Fear; confidence; market confidence D.Exports; imports; the exchange rate

C.Fear; confidence; market confidence

How did the housing boom of 1997-2006 increase aggregate demand? A.Interest rates increased to keep pace with housing demand. B.Higher interest rates created a boom in the banking sector. C.It created more jobs and increased wages in the construction sector. D.More consumers saved, so they could afford the higher housing prices.

C.It created more jobs and increased wages in the construction sector.

Which is the MOST credible monetary policy action? A.The central bank does nothing to the economy regardless of any economic shock. B.The central bank makes policy actions in secret to avoid speculation. C.The central bank announces its policy in public and sticks with the policy over time. D.The central bank attempts to confuse the public by changing its policy stance frequently.

C.The central bank announces its policy in public and sticks with the policy over time.

Which statement is TRUE? A.It may be difficult for the Fed to print enough money to have a noticeable effect on the economy. B.By the time fiscal policy is in place, it is likely that macroeconomic conditions may have changed entirely. C.The effectiveness lag associated with monetary policy is likely to be near zero. D.Monetary policy has no recognition lag.

C.The effectiveness lag associated with monetary policy is likely to be near zero.

Which of the following real shocks would likely have the largest impact on U.S. GDP? A.a major hurricane that hits the Gulf coast B.a severe drought in the Midwest C.a reduction in the overall supply of oil D.a decrease in the price of grain

C.a reduction in the overall supply of oil

Under Paul Volcker, the Fed reduced the inflation rate in the early 1980s by more than 10 percentage points, causing: A.housing prices to soar and interest rates to remain high. B.GDP growth rise to 6% and consumer confidence to grow. C.a severe recession to take place. D.unemployment to decrease.

C.a severe recession to take place.

A nominal GDP rule requires the Fed to: A.adjust interest rates in the opposite direction of real GDP growth. B.keep the rate of money growth constant. C.adjust the money supply enough to make up for changes in velocity. D.keep the money supply constant.

C.adjust the money supply enough to make up for changes in velocity.

If the reserve ratio is 10%, then a $100 increase in bank deposits can potentially lead to: A.an increase of $90 in the money supply. B.a decrease of $90 in the money supply. C.an increase of $1,000 in the money supply. D.a decrease of $1,000 in the money supply.

C.an increase of $1,000 in the money supply.

An appreciation of the Mexican peso would most likely be a result of: A.an increase in the supply of pesos. B.a decrease in Mexican imports in the United States. C.an increase of foreign investment in Mexico. D.a decrease in Mexican exports to the United States.

C.an increase of foreign investment in Mexico.

When the government sells bonds, some of the funds that would have gone to private investments go to the government. This situation is called: A.funneling. B.overcrowding. C.crowding out. D.under bidding.

C.crowding out.

A low saving rate in the United States is one possible reason for the U.S.: A.current account deficit. B.trade deficit. C.current account deficit, capital account surplus, and trade deficit. D.capital account surplus.

C.current account deficit, capital account surplus, and trade deficit.

An increase in the banking system's willingness to lend will cause the money multiplier to: A.decrease. B.become difficult to predict. C.increase. D.remain unchanged.

C.increase.

Which of the following would cause the AD curve to shift to the left? A.higher government budget deficits B.lower growth rate of output C.increased growth in imports D.lower taxes

C.increased growth in imports

In the basic model that includes the AD and LRAS curves only, an increase in aggregate demand: A.increases the inflation rate and the growth rate B.decreases the inflation rate and increases the growth rate. C.increases the inflation rate, but not the growth rate. D.decreases the inflation rate, but not the growth rate.

C.increases the inflation rate, but not the growth rate.

In the long run, with a floating exchange rate, changes in _____ will have an impact on the real exchange rate. A.the U.S. money supply only B.both the U.S. money supply and the foreign country's money supply C.neither the U.S. money supply nor the foreign country's money supply D.the foreign country's money supply only

C.neither the U.S. money supply nor the foreign country's money supply

If the Fed was concerned about the economy falling into recession, it might try to stimulate the economy by: A.conduct open market sales. B.raising the interest rate paid on reserves. C.purchasing additional government securities. D.raising the discount rate.

C.purchasing additional government securities.

An increase in expected inflation will cause the economy's long-run aggregate supply curve to: A.become steeper. B.shift outward. C.remain unchanged. D.shift inward.

C.remain unchanged.

A country can adopt a fixed exchange rate system through: A.removing the asset backing of its currency. B.allowing a freely functioning foreign exchange market. C.setting up a currency union. D.engaging in trade with other countries.

C.setting up a currency union.

The Fed's job in manipulating monetary policy is made harder by the fact that: A.monetary authorities do not have a good understanding of how monetary policy works. B.monetary policy is hardly ever effective in influencing business fluctuations. C.the Fed operates in real time and information on recessions becomes available with a lag. D.monetary policy is usually pulling the economy in the opposite direction from fiscal policy.

C.the Fed operates in real time and information on recessions becomes available with a lag.

On a given aggregate demand curve, if the rate of spending growth is 10% and the growth rate of the money supply is 2%, then the velocity of money must be growing at: A.20%. B.5%. C.12%. D.8%.

D. 8%

_____ is a significant reduction in the rate of inflation, while _____ is a reduction in the level of prices. A.Disinflation; stagflation B.Stagflation; deflation C.Deflation; disinflation D.Disinflation; deflation

D.Disinflation; deflation

If the economy is hit by a negative real shock that raises inflation and unemployment, which fiscal policy action should the government take in order to keep inflation and unemployment stable? A.cut taxes B.raise taxes C.increase government spending D.No government action can achieve those goals.

D.No government action can achieve those goals.

(Figure: Oil Market Diagrams) Consider the world oil market diagrams presented in the figure. Which of the panels correctly depicts what happened in the market for oil during the 1973 OPEC oil crisis? A.Panel C B.Panel A C.Panel D D.Panel B

D.Panel B

_____ are usually _____ in developing countries because of lower wages and immigration laws that prevent the free movement of labor. A.Services; more expensive B.Goods; more expensive C.Goods; less expensive D.Services; less expensive

D.Services; less expensive

Which describes one of the difficulties that make it hard for the Fed to effectively implement monetary policy? A.The effects of monetary policy always offset those of fiscal policy. B.The Fed has too much data to sort through quickly. C.All monetary policies must be approved by Congress before being implemented. D.The Fed's control of the money supply is incomplete and subject to uncertain lags.

D.The Fed's control of the money supply is incomplete and subject to uncertain lags.

In what way are monetary and fiscal policies similar? A.Neither involves a lag. B.Both involve a multiplier effect. C.They are both effective when the economy suffers from real shocks. D.They both target aggregate demand to overcome business fluctuations.

D.They both target aggregate demand to overcome business fluctuations.

During a recession, consumers hold more money by cutting back on their spending, resulting in _____ in inflation and _____ in real growth. A.a decrease; an increase B.an increase; an increase C.an increase; a decrease D.a decrease; a decrease

D.a decrease; a decrease

According to the text, the consensus about the effects of the 2009 fiscal stimulus was that: A.the spending on infrastructure created many new permanent jobs. B.most state governments did not benefit from the stimulus program. C.the massive government spending programs almost completely crowded out private spending. D.a lot of the tax cuts did not turn into consumer spending.

D.a lot of the tax cuts did not turn into consumer spending.

A savings glut in other countries is one possible reason for the U.S.: A.current account deficit. B.capital account surplus. C.trade deficit. D.current account deficit, capital account surplus, and trade deficit.

D.current account deficit, capital account surplus, and trade deficit.

When a negative shock to aggregate demand occurs, the inflation rate will: A.increase. B.remain the same. C.be automatically adjusted by the Fed. D.decrease.

D.decrease.

In a fractional reserve banking system, banks hold only a fraction of their: A.loans as reserves. B.monetary base. C.currency as reserves. D.deposits as reserves.

D.deposits as reserves.

If the Central Bank of China decides to hold more dollars as reserves, the: A.dollar's value will become more unpredictable. B.dollar's value will remain unchanged. C.dollar will depreciate. D.dollar will appreciate.

D.dollar will appreciate.

To offset the effect of negative growth in money velocity (), the central bank should: A.apply a policy that reduces the growth in money velocity. B.decrease the growth rate of the money supply. C.apply a policy that stabilizes the growth in money velocity. D.increase the growth rate of the money supply.

D.increase the growth rate of the money supply.

Refer to the figure. Suppose the economy is initially at point A in the diagram. If an increase in investment spending causes a shift of the AD curve from AD1 to AD4, then the government can avoid a short-run increase in inflation by: A.increasing government spending so that the AD curve shifts further out to AD5. B.increasing government spending so that the AD curve shifts back to AD1. C.increasing taxes so that the AD curve shifts further out to AD5. D.increasing taxes so that the AD curve shifts back to AD1.

D.increasing taxes so that the AD curve shifts back to AD1.

When the Fed lowers the Federal Funds rate: A.both interest rates and the money supply increase. B.both interest rates and the money supply decrease. C.interest rates increase but the money supply decreases. D.interest rates decrease but the money supply increases.

D.interest rates decrease but the money supply increases.

Which is NOT a function of the Federal Reserve? A.regulating the U.S. financial system B.serving as the lender of last resort C.regulating the U.S. money supply D.providing loans to small businesses

D.providing loans to small businesses

Using a graph of the AD and long-run aggregate supply curves, the Internet revolution of the 1990s caused: A.both real growth and inflation to increase. B.real growth to decrease and inflation to increase. C.both real growth and inflation to decrease. D.real growth to increase and inflation to decrease.

D.real growth to increase and inflation to decrease.

When falls, the aggregate demand curve: A.shifts to the right. B.becomes steeper. C.becomes flatter. D.shifts to the left.

D.shifts to the left.

Which institution usually has the most influence over aggregate demand in the United States? A.the U.S. Department of the Treasury B.the Comptroller of the Currency C.the Senate Banking Committee D.the Federal Reserve

D.the Federal Reserve

Economist Milton Friedman called for a policy rule that keeps the growth rate of the money supply at 3% because: A.the money supply has grown on average at 3% historically. B.spending shocks on average are 3% of real GDP. C.real shocks on average are 3% of real GDP. D.the economy's long-run potential growth rate is 3%.

D.the economy's long-run potential growth rate is 3%.

The United States currently has a net _____ with the rest of the world. A.capital deficit B.exchange rate deficit C.balance of payments deficit D.trade deficit

D.trade deficit

If instead of buying short-term Treasury securities the Fed decides to purchase the country's supply of paper clips, the money supply: A.will not change. B.might expand or contract. C.will contract. D.will expand.

D.will expand