Macroeconomics 1403 Final Exam Review
The Smoot-Hawley Act was enacted in
1930.
The Federal Reserve's stable-prices target is an average inflation rate of
2 percent.
During the Great Depression in the 1930s, the average tariff level in the United States peaked at about
20 percent.
The Federal Open Market Committee meets
8 times per year.
The statement that "Federal Reserve's monetary policy must be approved by the President of the United States" and that "the Federal Reserve Board of Governors meets approximately every six months to review the state of the economy and determine monetary policy" are
FALSE.
A tariff leaves the price of imports unchanged is
a FALSE statement.
Comparative advantage implies that a country will export those goods in which the country has
a comparative advantage.
Interest rates banks pay on deposits is NOT
a potential monetary policy instrument for the Fed.
The federal funds rate is
a potential monetary policy instrument for the Fed.
A voluntary export restraint is like
a quota on foreign exports.
Fiscal policy attempts to achieve all of the following objectives EXCEPT
a stable money supply.
A tariff is
a tax on an imported good or service.
Social Security benefits and expenditures on Medicare and Medicaid
are classified as transfer payments.
Expenditures such as Social Security benefits, farm subsidies and grants
are considered transfer payments.
Changes in tax rates
are included as part of fiscal policy.
Purchases of corporate bonds
are not government outlays.
In the 2000s U.S. tariffs were
at their lowest level.
Domestic consumers _____ from imports.
benefit
Once supply side effects are taken into account, tax cuts for labor income can
change the supply of labor and potential GDP.
Open market operations by the Fed lead to
changes in the federal funds rate.
Monetary policy affects real GDP by
changing aggregate demand.
The fundamental force that drives international trade is
comparative advantage.
The PCEPI inflation rate is calculated from a monthly chained price index for
consumption expenditure.
Fiscal policy includes
decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue.
On January 1, 2013 the income tax rate for single taxpayers making more than $400,000 per year increased from 35 percent to 39.6 percent. This tax rise has
decreased potential GDP.
In 2013 the United States reduced the tariff on ethanol. This tariff reduction ______ the U.S. production of ethanol and _____ the total U.S. consumption of ethanol.
decreased/increased
Prior to the Great Depression, the purpose of the federal budget was to
finance the activities of the government.
In 2018 the United States imposed a tariff on solar panels imported from China. U.S. producers of solar panels ______ from this tariff.
gained
A budget surplus occurs when
government tax revenues exceeds outlays.
Lowering the tariff on good X will _______ the domestic imports of good X.
increase
Achieving the goal of "moderate long-term interest rates" means that the Fed needs to
keep long-term nominal interest rates close to long-term real interest rates.
Quantitative easing refers to
large open market purchases of securities by the Federal Reserve which increases the quantity of reserves.
The current U.S. average tariff rate is
less than 5 percent.
To fight a recession the Fed will
lower the federal funds rate.
Changes in the federal funds rate policy instruments are available to the Fed as it tries to achieve its
macroeconomic goals
The key goal of monetary policy is to
maintain low inflation.
The purpose of the Employment Act of 1946 was to establish goals for the federal government that would promote
maximum employment, purchasing power, and production.
The United States decides to follow its comparative advantage and specialize in the production of airplanes. Because of this
more airplanes will be produced in the United States.
The U.S. government's budget has
mostly been in deficit during the past 30 years.
Tariffs and import quotas differ in that
one is a tax, while the other is a limit in quantity.
The government receives tax revenues from several sources. The following sources from ranked from largest to smallest are
personal income taxes, Social Security taxes, and corporate income taxes.
The largest source of government revenues is
personal income taxes.
One of the Fed's policy goals is
price level stability.
The Smoot-Hawley Act greatly
raised tariffs.
Faced with the Covid recession in 2020, the FOMC
rapidly lowered the federal funds rate target.
In the short run, the Federal Reserve faces a tradeoff between
real GDP growth and potential GDP growth.
Tariffs and import quotas both
result in lower levels of imports.
Tariffs generate
revenue for the government.
The discount rate is set by
the Fed's Board of Governors.
The target federal funds rate is set by
the Fed's FOMC.
The Council of Economic Advisers helps
the President and the public stay informed about the state of the economy.
The budget process includes
the President proposing the budget and the Congress passing the budget.
The Federal Reserve System is responsible for
the conduct of monetary policy.
The federal funds rate is
the interest rate banks charge each other on overnight loans.
The sum of past budget deficits minus the sum of past budget surpluses refers to
the national debt.
The Federal Reserve's monetary policy goals of maximum employment mean keeping the unemployment rate close to
the natural unemployment rate.
An import quota is a government-imposed restriction on
the quantity of a specific good that can be imported.
The Employment Act of 1946 states that it is
the responsibility of the federal government to promote maximum employment.
When interest income is taxed and the inflation rate rises,
the tax revenue collected by the government increases.
The difference between the before-tax and after-tax rates is referred to as
the tax wedge.
A major purpose of tariffs is
to discourage imports.
