Macroeconomics test 3

Relatively scarce

Water is not a good form of money because it is not:

Price level and real GDP will both decrease

What is most likely to happen to the price level and real GDP if the Fed raises the discount rate and sells government bonds through an open market operation

An increase in income tax

Which of the following events is likely to lower interest rates in the economy

Lisa is comparing the prices of different apartments for rent

Which of the following individuals is using money as a unit of account

0.875

Assuming no imports or taxes, if output increases by $16 billion in government spending increases by $2 billion, what is the MPC in the economy

By $44 billion

Assuming no trade, if the MPC is 0.75 and the government raises spending by $11 billion, by how much will output rise

It needs to sell $8 billion worth of bonds through the open market operation

Assuming the banks lend all of their excess reserves and people deposit all of their money, what will the fed have to do in order to decrease the supply of money by $4 billion if the required reserves ratio is .20

Unit of account

Mandy compares the prices of a Honda accord and a Chevy Malibu, Mandy is using money as

0.15

Martin's autonomous consumption is $8,000, his disposable income is $80,000 and he consumes $76,000 worth of goods. What is his MPC

A store of value

Michael is putting money in a Roth IRA so he can have money for his retirement. Michael is using money as:

M1 and M2 will both increase

Miya sells BMW stocks and places the money in a checking account. What would happen to M1 and M2 as a result?

Education

On which of these categories does the federal government spends the least amount of money

0.79

Ron consumes $55 and saves $15 as a result of his income increasing, what approximately is Ron's MPC

0.15

Sally consumes $82,000 worth of goods. If Sally's disposable income is $80,000 and her autonomous consumption is $14,000, what does Sally's MPS equal

She is saving $8,000

Sheila's MPC is 0.80, her autonomous consumption is $10,000 and she consumes $82,000 worth of goods. How much is she saving?

Classical economists

Some economics believe that the recent attempts by government to stimulate the economy only raised the deficit and gave money to banks that should have failed. This statement best supports the view of which school of thought, in other words which school of thought would make this statement

$8,000

Suppose that Maria spends 84,500 on consumption, her disposable income is $90,000 and her Marginal Propensity to Save is .15. What does Maria's autonomous consumption equal?

14.4

Suppose that in 2000 the price level= 120, the velocity of money= 18 and the supply of money= 80 billion. If real GDP increased by 20% between 2000 and 2001, what does real GDP equal in 2001

$870 billion

Suppose that in 2011 the government collected $300 billion in revenue and spent $380 billion, while in 2012 the government revenue increase to $360 billion and is spending fell to $350 billion. If the government had a debt of $800 billion in the beginning of 2011, how much debt would it have by the end of 2012

$5.15 trillion

Suppose that in 2016 the federal government spent $730 billion and collected $480 billion in taxes while in 2017, government spending fell to $680 billion and government revenue increased to $780 billion. If the government debt was $5 trillion at the beginning of 2016, what will it be at the end of 2017?

$400 billion

Suppose that the federal government had a debt of $9.0 trillion at the beginning of 2006 and a debt of $9.3 trillion by the end of 2007. In 2006 the government spent $450 billion and received $300 billion in tax revenue. If in 2007 the government spent $550 billion how much tax revenue did the government receive in 2007

24

Suppose that the price level = 120, supply of money = $20 billion and real GDP= $4 billion. What does the velocity of money equal

It will increase to 150

Suppose that the price level= 20, supply of money equals= $20 billion and real GDP= $4 billion. If the velocity of money stays the same but real GDP increases by 20%, what will happen to the price level if the supply of money increases by $10 billion

$200 billion

Suppose there are no imports, taxes or other leakages in the economy. If the Marginal Propensity to Consume is .80 and the government increases spending by $40 billion, by how much would output increase in the economy?

Increase taxes and lower government spending

According to Keynesians, what should the government do if inflation is relatively high and employment is relatively low

Reduce the supply of money

According to monetarists, what should the government do if unemployment is 3.5% and inflation is 6.5%

By $800

Alexandria's MPC is 0.86. When her income increases, she raised her savings by $112. By how much did her disposable income increase?

She is saving $3,000

Alison's disposable income is $90,000, her autonomous consumption is $15,000 and her MPC is 0.80, how much money is Alison saving

.08

Allison deposited $200,000 in her savings account. Her bank loaned a portion of the money that they could loan to Lisa who deposits the money in another bank. The second bank loaned $169,280 out from the deposit. Assuming the banks lend all of their access reserves and people deposit all of their money, what is the required reserve ratio

Buy $48 billion worth of government bonds

Assume that banks lend out all of their excess reserves and individuals deposit all of their money. If the required reserve ratio is .20, what does the Fed have to do to increase the supply of money by $240 billion

A hedge fund

Gary deposit his money in a financial institution that invests it in derivatives, currency swaps, and other risky assets. What type of institution did Gary invest in

Government expenditure would rise during an expansion

If the federal government was required to balance its budget which of the following would most likely happen

Congress raising income tax on the rich

If the government currently has a balanced budget, which one of these actions will lead to a surplus in the government's budget

Buy $40 billion worth of government bonds

If the required reserve ratio is .20 and the Fed wants to increase the supply of money by $200 billion, what should the fed do assuming that people deposit all their money and the banks lend all of their excess reserves

$8 billion

If the velocity of money is 12, the price level is 60, and the supply of money is $40, what does the real GDP equal

Increase income tax

If unemployment is 4% and inflation is 4%, which of the following is a Keynesian economist likely to advocate

$400 billion

In 2008, the government increase its debt by $80 billion and it received $320 billion in revenue. How much money did the government spend in 2008?

Legislative lag

In 2011, the Democrats controlled the White House and the Senate while Republicans controlled the house of representatives. Consequently any changed policy had to be debated for a long time resulting in a long

$460 billion

In 2014, the government reduced its debt by $240 billion and it received $700 billion in tax revenue. How much money did the government spend in 2014?

Commodity money

In medieval times, peasants used to pay their taxes using grain, grain is considered what form of money

Commodity money

In parts of Africa parents of the bride give the grooms family a dowry off goats and cows, what form of money is livestock

M2 decreases by $8,000 but M1 remains the same

JT uses $8000 from his savings account as the initial deposit on a house, as a result

Set the required reserve ratio for the Bank of America

Which of the following is a role of the Federal Reserve System? The Federal Reserve System, more commonly called the Fed, has four main roles: (1) To act as the central bank for the Federal government only; (2) Act as a lender of last resort; (3) Regulate the monetary policy in the United States; (4) Regulate depository institutions. As the central bank for the U.S., the Fed manages the federal government accounts. As a lender of last resort, the Fed lends money to financial institutions in financial trouble, though usually only to large institutions. As a manager of our monetary policy, the fed uses a variety of tools to control the supply of money and influence interest rates. Finally, the fed regulates all commercial banks or credits unions that operate in more than one state requires them, for instance, to report their financial statements and have a certain capital requirement.*a) Set the Required Reserve Ratio for commercial banks

The Fed raising the required reserve ratio during a recession

Which of the following is an example of a pro cyclical government policy

A progressive corporate tax

Which of the following is an example of an automatic stabilizer

Congress lowering government spending during a resession

Which of the following is an example of pro-cyclical

A silver bar

Which of the following is an example of token money?

Government spending would decrease when unemployment rises

Which of the following statements would be usually true if the federal government requires a balanced budget every year

Legislative lag

Which of the lags will increase if a new amendment requires that, in addition to Congress, the federal budget has to be approved by the majority of the states

Maggie uses funds from her savings account to purchase a government bond

Which of these actions will lower the amount of money and M2 without changing the amount in M1

A motorcycle

Which of these assets is the least liquid one

A US government bond

Which of these assets is the most liquid one

A deflation that resulted from a drop in consumption and investment

Which of these events is most likely to reduce interest rates in the economy

Commercial bank

Which of these institutions is a depository institution that offers a variety of depository accounts and makes loans to both members and nonmembers

Target a lower federal funds rate

Which of these is the fed likely to do during a recession

Sell government bonds

Which of these policies is the Fed most likely to follow if unemployment is well above the full level of employment and inflation is moderately high

Target a lower Federal Funds Rate

Which of these policies should the Fed engage in if unemployment is 9% and inflation is 1%

Lending money to banks that are in financial trouble

Which of these tasks is a role that the Fed has

Targeting the federal funds rate

Which of these tasks is a role that the Fed has

They are not divisible

Why are trucks not a good form of money