Macroeconomics: Test 3
Suppose that the reserve requirement is 12%, and that commercial banks do NOT hold any excess reserves. An injection of $10 billion into the monetary base by the Federal Reserve _____ the money supply by _____ than $10 billion. A. increases/ more B. decreases/ less C. decreases/ more D. increases/ less
A. increases/ more
When the value of government budget outlays exceeds the value of government budget receipts, there is a budget surplus, and the national debt is shrinking. A. True B. False
B. False
Suppose that Jose withdraws $45 from his mom's checking account at the Bank of Orlando. He keeps $15 in cash and deposits the rest in his own savings account at Bank of Jacksonville. Which of the following has occurred A. M1 has decreased by $45, and M2 has increased by $30. B. M1 has decreased by $30, but M2 remains unchanged. C. M1 has decreased by $45, but M2 remains unchanged D. M1 has increased by $30, and M2 has increased by $45. E. None of the above
B. M1 has decreased by $30, but M2 remains unchanged
Suppose that Antonio withdraws $95 from his checking account at the Bank of America. He keeps $50 in cash and deposits the rest in his own savings account at Bank of Tampa. Which of the following has occurred? A. M1 has decreased by $45, and M2 has increased by $45. B. M1 has decreased by $45, but M2 remains unchanged. C. M1 has decreased by $95, but M2 remains unchanged. D. M1 has increased by $50, and M2 has increased by $45. E. None of the above
B. M1 has decreased by $45, but M2 remains unchanged.
Suppose that the reserve requirement is 5% and that Gator Bank, a commercial bank in Gainesville, has $30 million in deposits. What is the minimum quantity of reserves that Gator Bank is required to hold? A. $1.5 million B. $3 million C. $5 million D. $7.5 million E. None of the above
A. $1.5 million
Suppose that when the government increases taxes by $160 billion, Real GDP falls by $240 billion. This implies that the value of the tax multiplier is ___. A. -1.5 B. -0.67 C. 0.67 D. 1.5
A. -1.5
Reducing taxes is considered ____. A. Expansionary Fiscal Policy B. Expansionary Monetary Policy C. Contractionary Fiscal Policy D. Contractionary Monetary Policy
A. Expansionary Fiscal Policy
Generally speaking, the lowest interest rate in the economy is the ____. A. Federal Funds Rate B. Prime Rate C. Discount Rate D. Mortgage Rate
A. Federal Funds Rate
The interest rate that depository institutions charge each other for "overnight loans" is referred to as the ____. A. Federal Funds Rate B. Real Interest Rate C. Discount Rate D. Prime Rate
A. Federal Funds Rate
Suppose that the government spending multiplier is 2, and that the tax multiplier is -2.5. An equal-sized reduction in government spending and taxes is expansionary fiscal policy. A. True B. False
A. True
True or False: The U.S. Personal Income Tax is specified using marginal tax rates to ensure that any raise will result in increases take-home pay. A. True B. False
A. True
True or False: The government spending multiplier must always be positive, and the tax multiplier must always be negative. A. True B. False
A. True
When a country lies on the "right side" (as this was defined during lecture) of the Laffer Curve, an increase in the tax rate leads to ____. A. an increase is government tax receipts B. an increase in Real GDP C. a decrease in government tax receipt D. a reduction in cyclical unemployment E. an increase in cyclical unemployment
A. an increase is government tax receipts
When the reserves at an otherwise-healthy commercial bank fall below the reserve requirement, the bank will most likely need to take out ____. A. an overnight loan B. a discount loan C. a reserve loan D. a depository loan
A. an overnight loan
Saudi Arabia pegs its currency (the Saudi Riyal) to the U.S. Dollar. Suppose that the demand for Saudi oil (its largest export) substantially decreases during a recession. The Central Bank of Saudi Arabia must respond by ____ Riyals, because the Riyal would otherwise ____. A. buying/ depreciate B. buying/ appreciate C. selling/ depreciate D. selling/ appreciate
A. buying/ depreciate
Suppose that Brazil has pegged its currency (singular: Real/ plural: Reais) to the U.S. Dollar. A reduction in the demand for Brazilian exports will ____, and the Brazilian central bank must respond by _____ Brazilian Reais. A. decrease the demand for the Brazilian Reais/ purchasing B. increase the demand for the Brazilian Reais/ purchasing C. decrease the demand for the Brazilian Reais/ selling D. increase the demand for the Brazilian Reais/ selling
A. decrease the demand for the Brazilian Reais/purchasing;
The Required Reserve Ratio is the minimum percentage of ____ that ____ are required to hold as reserves. A. deposits/ depository institutions B. savings/ firms C. savings/ depository institutions D. deposits/ governments
A. deposits/ depository institutions
Suppose that the government spending multiplier is 3.2, and that the tax multiplier is -1.8. An equal-sized increase in government spending and taxes would be considered ___. A. expansionary fiscal policy B. contractionary monetary policy C. expansionary monetary policy D. contractionary fiscal policy E. A and C
A. expansionary fiscal policy
A fixed exchange rate is one that ____. A fixed exchange rate is achieved ____ A. is set by the government or the central bank/by central bank intervention in the foreign exchange market B. is determined by demand and supply in the foreign exchange market/with no direct intervention by the central bank C. follows a path determined by the government or the central bank/by the central bank buying or selling domestic currency in the foreign exchange market D. is set by the government or the central bank/by the intervention of market traders in the foreign exchange market
A. is set by the government or the central bank/by central bank intervention in the foreign exchange market
Many Ecuadorean citizens work in the United States. When these individuals send remittances to their families in Ecuador appears as a... A. positive entry in the Ecuadorean Current Account B. positive entry in the American Financial Account C. positive entry in the Ecuadorean Financial Account D. positive entry in the American Current Account E. negative entry in the Ecuadorean Financial Account
A. positive entry in the Ecuadorean Current Account
Suppose that the Banco de Mexico, Mexico's central bank, wants to depreciate the Mexican peso against the U.S. Dollar. It could accomplish this by ____ pesos and ____ dollars. A. selling/ purchasing B. purchasing/ purchasing C. purchasing/ selling D. selling/ selling
A. selling/ purchasing
***Summer 2019: Question 4. Refer to the table above. The national debt is ____, because the value of government budget receipts is ____ than the value of government budget outlays. A. shrinking/greater B. growing/less C. shrinking/less D. growing/greater
A. shrinking/greater
When depository institutions hold excess reserves, the money multiplier becomes ____, and the effect of changes in the monetary base is ____ pronounced. A. smaller/ less B. larger/ less C. smaller/ more D. larger/ more
A. smaller/ less
In the United States, the largest portion of Federal Budget Receipts is accounted for by ____. A. the Personal Income tax B. the Social Security Tax and other payroll taxes C. the Corporate Income Tax D. Indirect taxes and other receipts
A. the Personal Income tax
In the United States, fiscal policy is conducted by ____, and monetary policy is conducted by ____. A. Congress and the President/ Congress and the President B. Congress and the President/ the Federal Reserve C. the Federal Reserve/ Congress and the President D. the Federal Reserve/ the Federal Reserve
B. Congress and the President/ the Federal Reserve
True or False: If the Bank of Thailand wants to maintain an artificially low exchange rate for its currency (the Baht), it must purchase Baht with its foreign reserves. A. True B. False
B. False
***Fall 2019: Question 13. Refer to the marginal tax rate schedule above. An individual earning $300,000 per year owes ____ in taxes. A. $60,000 B. $85,000 C. $115,000 D. $145,000 E. $180,000
B. $85,000
Which of the following is NOT one of the functions of money? A. Unit of Account B. Barter Device C. Medium of Exchange D. Store of Value
B. Barter Device
Fiscal Policy is economic policy conducted by ____ in the United States, and it involves changes to ____. A. Congress and the President/ the money supply and interest rates B. Congress and the President/ government spending and taxes C. The Federal Reserve/ the money supply and interest rates D. The Federal Reserve/ government spending and taxes
B. Congress and the President/ government spending and taxes
Which of the following statements best describes why the demand for money is downward sloping? A. The Federal Funds Rate is the price of making an overnight loan. B. The short-term interest rate is the opportunity cost of holding money. C. The long-term interest rate is earned by households that supply their savings to the market for loanable funds. D. The Federal Funds Rate is the lowest interest rate in the entire economy.
B. The short-term interest rate is the opportunity cost of holding money.
Fiscal Policy attempts to achieve all of the following objectives EXCEPT ____ A. sustained economic growth B. a stable money supply C. price level stability D. full employment
B. a stable money supply
***Fall 2019: Question 33. Consider the graph above. When the demand for Australian Dollars shifts from D0 to D1, the Australian Dollar _____, and Australia's net exports will _____ as a consequence. A. depreciates/ decrease B. appreciates/ decrease C. depreciates/ increase D. appreciates/ increase
B. appreciates/ decrease
***Summer 2019: Question 3. Refer to the table above. The Government Budget is currently experiencing a ____. A. budget deficit of $0.8 trillion B. budget surplus of $0.2 trillion C. budget deficit of $0.6 trillion D. budget surplus of $0.8 trillion E. budget deficit of $0.2 trillion
B. budget surplus of $0.2 trillion
Enacting Automatic Fiscal Policy ____ a deliberate act of Congress and the President, and enacting Discretionary Fiscal Policy____ a deliberate act of Congress and the President. A. does not require/ does not require B. does not require/ requires C. requires/ does not require D. requires/ requires
B. does not require/ requires
Suppose that the government spending multiplier is 2, and that the tax multiplier is -1.5. If the government increases government spending and taxes by $950 billion. Real GDP would ____ by ____. A. increase/ $ 950 billion B. increase/ $475 billion C. fall/ $950 billion D. fall/ $1,425 billion D. fall/ $475 billion
B. increase/ $475 billion
Reducing labor income taxes ____ the supply of labor and equilibrium employment, leading to a(n) ____ in Potential GDP. A. increases/ decrease B. increases/ increase C. reduces/ decrease D. reduces/ increase
B. increases/ increase
When the economy enters a recession, and incomes are falling, spending on needs-tested programs ____, and tax receipts ____. A. increases/ grow B. increases/ shrink C. decreases/ grow D. decreases/ shrink
B. increases/ shrink
Which of the following is NOT one of the benefits of money? A. medium of exchange B. pool of risk C. store of value D. unit of account
B. pool of risk
Which of the following is a function of depository institutions? A. reducing the cost of regulatory compliance B. pooling risk C. reducing the cost of withdrawing cash D. providing a vault
B. pooling risk
Automatic Fiscal Policy is often described as the "automatic stabilizers," because tax receipts ___, and spending on needs-tested programs ____ during an inflationary gap. A. rise/ increases B. rise/ decreases C. fall/ increases D. fall/ decreases
B. rise/ decreases
Which of the following is NOT one of the common functions of a central bank? A. serving as the bankers' bank B. setting the capital gains tax rate C. conducting monetary policy D. serving as a lender of last resort
B. setting the capital gains tax rate
Commercial banks are owed by their ____, and credit unions are owned by their ____. A. shareholders/ shareholders B. shareholders/ members C. members/ shareholders D. members/ members
B. shareholders/ members
Commercial banks are typically owned by ____, and credit unions are typically owned by ____. A. shareholders/ shareholders B. shareholders/ members C. members/ shareholders D. members/ members
B. shareholders/ members
***Spring 2020: Question 7. Refer to the table above. When Real GDP equals $18 trillion, there is a government budget _____ of _____. A. deficit/ $0.4 trillion B. surplus/ $0.2 trillion C. deficit/ $2.7 trillion D. deficit/ $2.5 trillion E. surplus/ $2.7 trillion
B. surplus/ $0.2 trillion
When government tax revenues exceed budget outlays, the government is running a budget ____, and an existing government debt is ____. A. deficit/ shrinking B. surplus/ shrinking C. surplus/ growing D. deficit/ growing
B. surplus/ shrinking
To change the Federal Funds Rate, the Fed ____. A. changes the income tax rate on interest income B. uses open market operations to change the quantity of reserves C. increases or removes money from the stock market D. coordinates with banks on establishing the new rate E. tells banks how much to charge
B. uses open market operations to change the quantity of reserves
***Summer 2019: Question 6. Refer to the marginal tax rate schedule above. An individual earning $150,000 per year owes ____ in taxes. A. $19,000 B. $23,00 C. $29,000 D. $32,000 E. $45,000
C. $29,000
Which of the following is NOT a type of depository institution? A. Commercial banks B. Thrift institutions C. Certificates of deposit D. Money-market mutual funds
C. Certificates of deposit
____ is defined as the use of the Federal Budget to pursue a macroeconomic objective. A. Monetary Policy B. Exchange Rate Policy C. Fiscal Policy D. None of the Above
C. Fiscal Policy
Suppose that Isabel withdraws $90 from her mom's savings account at the Bank of Orlando. She keeps $40 in cash and deposits the rest in her own checking account at Bank of Miami. Which of the following has occurred? A. M1 has decreased by $50, and M2 has increased by $40. B. M1 has increased by $40, and M2 has increased by $50. C. M1 has increased by $90, but M2 remains unchanged. D. M1 has increased by $50, but M2 remains unchanged. E. None of the above
C. M1 has increased by $90, but M2 remains unchanged.
Banks create money by ____. A. Printing more $20 bill B. Sending out credit cards to depositors C. Making loans D. Increasing the desired reserve ratio
C. Making loans
Which of the following receipts accounts for the largest share in the Federal Budget? A. Social Security Taxes B. Indirect Taxes C. Personal Income Taxes D. Corporate Income Taxes
C. Personal Income Taxes
Which of the following is NOT one of the exchange rate policies that a central bank could adopt? A. a fixed exchange rate B. a managed float C. a fixed float D. a crawling peg
C. a fixed float
Reserves consist of the currency in the ____ plus the balance on its ____ account at ____. A. market/ reserve/ a savings bank B. checking account/ certificate of deposit/ a Federal Reserve Bank C. bank's vaults/ reserve/ a Federal Reserve Bank D. savings account/ money market/ an investment bank
C. bank's vaults/ reserve/ a Federal Reserve Bank
Which of the following types of financial institutions does NOT engage in "retail banking"? A. credit unions B. commercial banks C. central banks D. savings banks
C. central banks
Suppose that the Federal Reserve conducts an open market sale. This is considered _____ monetary policy. In response, the size of the monetary base ____, and the size of the money supply ____. A. expansionary/ increases/ increases by more B. expansionary/ increases/ increases by less C. contractionary/ decreases/ decreases by more D. contractionary/ decreases/ decreases by less E. contractionary/ increases/ increases by more
C. contractionary/ decreases/ decreases by more
Suppose that the government spending multiplier is 3.0, and that the government reduces government spending by $60 million. Real GDP will ____ by ____. A. decrease/ $60 million B. increase/ $60 million C. decrease/ $180 million D. decrease/ $20 million E. increase/ $20 million
C. decrease/ $180 million
A(n) ____in the tax on capital income ____ the real interest rate and ____ private investment spending. A. increase/ decreases/ decreases B. increase/ increases/ increases C. decrease/ decreases/ increases D. decrease/ decreases/ decreases
C. decrease/ decreases/ increases
Suppose that the Federal Reserve raises the reserve requirement, and that depository institutions do NOT hold excess reserves. In response, the size of the monetary base ____, and the size of the money supply ____. A. does not change/ increases B. increases/ decreases C. does not change/ decreases D. decreases/ does not change E. does not change/ does not change
C. does not change/ decreases
Which of the following is NOT one of the standard monetary policy tools available to a central bank? A. discount policy B. open-market operations C. exchange rate policy D. the reserve requirement
C. exchange rate policy
Interest rates tend to be ____ for longer term loans than for shorter term loans, because longer term loans are generally ____ risky. A. higher/ less B. lower/ less C. higher/ more D. lower/ more
C. higher/ more
Suppose that the reserve requirement is 5%, and that commercial banks hold excess reserves. An injection of $10 billion into the monetary base by the Federal Reserve increases the money supply by _____. A. more than $200 billion B. exactly $200 billion C. less than $200 billion
C. less than $200 billion
Commercial banks are able to create money by _____. A. exchanging their reserves at the Fed for vault cash B. making customers pay back their loans C. making loans D. printing Federal Reserve Notes
C. making loans
Money serves as a ____. A. means to conduct better transactions B. means of worker exploitation and capitalist enrichment C. medium of exchange, unit of account, and store of value D. means of settling debts, transaction lubricant, and private commodity E. means of payment, legal obligation, and public tax
C. medium of exchange, unit of account, and store of value
Money is defined as any ____. A. perfectly or near-perfectly solvent asset B. perfectly or near-perfectly solvent liability C. perfectly or near-perfectly liquid asset D. perfectly or near-perfectly liquid liability
C. perfectly or near-perfectly liquid asset
Suppose that Johnnie Walker (a Scottish whisky producer) builds a new distillery in Canada. This transaction appears as a ____ entry in the Canadian ____. A. positive/ Current Account B. negative/ Capital and Financial Account C. positive/ Capital and Financial Account D. negative/ Current Account
C. positive/ Capital and Financial Account
If the Federal Reserve wishes to enact contractionary monetary policy, it will _____ the federal funds rate, which will lead to a(n) _____ in consumer spending. A. raise/ increase B. reduce/ increase C. raise/ decrease D. reduce/ decrease
C. raise/ decrease
Which of following forms of money is included in the M2 definition of money, but not in the M1 definition of money? A. checking deposits B. travelers' checks C. savings deposits D. cash and coins E. None of the above
C. savings deposits
When the government reduces the tax on labor income, the ____ curve shifts to the ____. A. supply of labor/ left B. demand for labor/ left C. supply of labor/ right D. demand for labor/ right
C. supply of labor/ right
Which of the following is NOT a monetary policy tool of the Federal Reserve? A. discount policy B. open market operations C. transfer payments D. the reserve requirement
C. transfer payments
***Spring 2020: Question 8. Refer to the table above. The government experiences a "balanced budget" when Real GDP equals _____. A. $17 trillion B. 18 trillion C. $19 trillion D. $20 trillion E. $21 trillion
D. $20 trillion
***Spring 2020: Question 36. Refer to the table above. The value of the Capital and Financial Account is ____. A. $642 billion B. $631 billion C. $595 billion D. $559 billion
D. $559 billion
Which of the following best describes a discount loan? A. An overnight loan taken out by an insolvent commercial bank from another commercial bank B. A loan made by an insolvent commercial bank to another commercial bank C. An overnight loan made between regional Federal Reserve banks D. A loan taken out by an insolvent commercial bank from a regional Federal Reserve bank
D. A loan taken out by an insolvent commercial bank from a regional Federal Reserve bank
Open-Market Sales are considered ____. A. Expansionary Fiscal Policy B. Expansionary Monetary Policy C. Contractionary Fiscal Policy D. Contractionary Monetary Policy
D. Contractionary Monetary Policy
Which of the following is NOT one of the categories of Federal Budget outlays? A. Transfer Payments B. Interest Payments on the Federal Debt C. Expenditure on Goods and Services D. Indirect Taxes
D. Indirect Taxes
The Federal Reserve is the lender of last resort, which means that if ____ is short on reserves, it can borrow from the ____. A. the Fed/ government B. a bank/ government C. the Fed/ the Bank of International System D. a bank/ Fed
D. a bank/ Fed
In an open-market purchase, the Fed ____ government securities, which ____ bank reserves and ___ the Federal Funds Rate. A. sells/ increases/ lowers B. sells/ decreases/ lower C. buys/ decreases/ raises D. buys/ increases/ lowers E. buys/ increases/ raises
D. buys/ increases/ lowers
Japan's central bank, the Bank of Japan, likely... A. provides banking services to foreign households. B. changes the Japanese income tax system. C. sets the amount of government spending in Japan. D. controls the quantity of money in circulation in Japan. E. B and D
D. controls the quantity of money in circulation in Japan.
When Congress passes a large series of tax cuts into law, it is conducting ____, and this is more desirable in the presence of a ____. A. discretionary contractionary fiscal policy/ expansionary gap B. automatic expansionary fiscal policy/ expansionary gap C. automatic contractionary fiscal policy/ recessionary gap D. discretionary expansionary fiscal policy/ recessionary gap E. automatic expansionary fiscal policy/ recessionary gap
D. discretionary expansionary fiscal policy/ recessionary gap
Professor Knight purchases new chunky, unbreakable glassware from Mexico. This transaction directly... i. decreases (enters negatively into) the U.S. Net Exports ii. decreases (enters negatively into) the U.S. Current Account. iii. decreases (enters negatively into) the U.S. Capital & Financial Account A. only ii B. only ii C. only iii D. i and ii E. i and iii
D. i and ii
Reducing the Labor Income Tax leads to a(n) ____ in employment, and is ____. A. reduction/ contractionary fiscal policy B. increase/ contractionary monetary policy C. reduction/ expansionary fiscal policy D. increase/ expansionary fiscal policy E. increase/ expansionary monetary policy
D. increase/ expansionary fiscal policy
During a recession, spending on needs-tested programs ____, and tax receipts ____. A. decreases/ rise B. decreases/ fall C. increases/ rise D. increases/ fall
D. increases/ fall
***Spring 2020: Question 18. The table above provides information from Gator Credit Union's balance sheet. Gator Credit Union is ____, because the value of total liabilities ____ the value of total assets. A. liquid/ exceeds B. illiquid/ is less than C. illiquid/ exceeds D. insolvent/ exceeds E. solvent/ is less than
D. insolvent/ exceeds
After Queen Elizabeth receives a jar of maple syrup from Justin Trudeau, British citizens drastically increase their demand for Canadian maple syrup. These transactions appear as a... A. negative entry in the Canadian Current Account B. positive entry in the Canadian Financial Account C. negative entry in the British Financial Account D. negative entry in the British Current Account
D. negative entry in the British Current Account
Suppose that the United States government commits to providing Caribbean nations $75 billion to fight a global pandemic. This transaction appears as a ____ entry in the American ____. A. positive/ Current Account B. negative/ Capital and Financial Account C. positive/ Capital and Financial Account D. negative/ Current Account
D. negative/ Current Account
When the Federal Reserve wishes to reduce the money supply, it may consider conducting an open-market ____ of government securities or ____ the reserve requirement. A. purchase/ lowering B. purchase/ raising C. sale/ lowering D. sale/ raising
D. sale/ raising
When the Federal Reserve conducts an open-market ____, the total quantity of reserves in the banking system ____, and the money supply decreases. A. purchase/ grows B. sale/ grow C. purchase/ shrinks D. sale/ shrinks
D. sale/ shrinks
Increasing the tax on capital gains causes the ____ loanable funds to shift ____ and leads the equilibrium real interest rate to ____ in response. A. supply of/ rightward/ fall B. demand for/ leftward/ fall C. demand for/ rightward/ rise D. supply of/ leftward/ rise E. demand for/ rightward/ fall
D. supply of/ leftward/ rise
***Fall 2019: Question 9. Refer to the table above. During 2018, there was a government budget ____ of ____.A. surplus/ $13.5 trillion B. deficit/ $5.7 trillion C. surplus/ $5.7 trillion D. surplus/ $0.1 trillion E. deficit/ $13.5 trillion
D. surplus/ $0.1 trillion
Which of the following is NOT a function of depository institutions in the financial system? A. create liquidity B. lowing the cost of monitoring borrowers C. pool risks D. lowering the costs of borrowing money E. All of the above are functions of depository institutions.
E. All of the above are functions of depository institutions.
Suppose that the reserve requirement is 8% and that commercial banks are NOT holding excess reserves. If the Federal Reserve wishes to expand the money supply by $75 billion, it would aim to ____ the monetary base by ____. A. shrink/ $4 billion B. shrink/ $6 billion C. grow/ $4 billion D. shrink/ $12.5 billion E. None of the above
E. None of the above
Which of the following liquid assets is included in the M1 definition of money, but not in the M2 definition of money? A. savings account deposits B. checking account deposits C. time deposits D. money market mutual funds E. None of the above
E. None of the above
Suppose that the tax multiplier is -2, and that the government wishes to increase Real GDP by $40 million. The government could ___ taxes by ____. A. increase/ $20 million B. increase/ $40 million C. decrease/ $40 million D. increase/ $80 million E. decrease/ $20 million
E. decrease/ $20 million
***Fall 2019: Question 8. Refer to the table above. During 2017, there was a government budget ____ of ____. A. surplus/ $5.5 trillion B. deficit/ $13.4 trillion C. surplus/ $13.4 trillion D. surplus/ $0.4 trillion E. deficit/ $0.4 trillion
E. deficit/ $0.4 trillion
The process of adopting a officially foreign country's currency is referred to as _____, and this process limits the country's ability to conduct _____. A. euroization/ monetary policy B. dollarization/ fiscal policy C. euroization/ fiscal policy D. currency pegging/ monetary policy E. dollarization/ monetary policy
E. dollarization/ monetary policy
An example of automatic fiscal policy is ____. A. the Federal Reserve reducing interest rates as economic growth slows B. Congress passing a tax rate reduction package C. the federal government expanding spending at the Department of Education D. a change in taxes that has no multiplier effect E. expenditure for unemployment compensation increasing as economic growth slows
E. expenditure for unemployment compensation increasing as economic growth slows
Reducing capital gains taxes ultimately leads to a(n) ____ in Real GDP, which is why it is considered ____. A. increase/ expansionary monetary policy B. increase/ contractionary monetary policy C. decrease/ contractionary fiscal policy D. decrease/ contractionary monetary policy E. increase/ expansionary fiscal policy
E. increase/ expansionary fiscal policy
Money is defined as perfectly or near-perfectly ____. Credit cards ____ considered to be money. A. liquid liability/ are B. illiquid asset/ are not C. liquid asset/ are D. illiquid liability/ are not E. liquid asset/ are not
E. liquid asset/ are not
Suppose that the government spending multiplier is 2.5, and that there is a $350 billion expansionary gap. If the government plans to adjust government spending to close this output gap, it could ____. A. increase government spending by $140 billion B. reduce government spending by $875 billion C. increase government spending by $875 billion D. reduce government spending by $350 billion E. reduce government spending by $140 billion
E. reduce government spending by $140 billion
