Microeconomics Final

German luxury car exports were hurt in 2009 as a result of the recession. How would this decrease in exports have affected Germany's aggregate demand curve?

The aggregate demand curve would have shifted to the left.

A bank is legally required to hold a fraction of its ________ as ________.

deposits; required reserves

As the recession persisted into 2009, the unemployment rate in the United States rose to ________, the highest rate since the recession of 2001-2002 and the second highest since the Great Depression.

9.3 percent

Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?

Banks create money to make a profit. Banks create money when they make loans. The loans take the form of checking account deposits. Asking why banks create money is the same as asking why they make loans.

The Fed has more control over open market operations as compared to discount policy.

True

T/F : An increase in government spending will result in an increase in the price level and an increase in real GDP in the long run

False

T/F : If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase.

False

T/F : Your checking account balance is included in your bank's assets.

False

Suppose there has been an increase in investment. As a result, real GDP will ________ in the short run

Increase

A good can serve as money only if

citizens accept the good as a means of payment for transactions and debts.

Which is not counted in M1?

credit card balances

Suppose there has been an increase in investment. As a result, real GDP will ________ in the long run

decrease to its initial value

Deflation will

increase the quantity of real GDP demanded

An increase in the price level will

move the economy up along a stationary aggregate demand curve

If you transfer all of your currency to your checking account, then initially, M1 will ________ and M2 will ________.

not change; not change

Dollar bills in the modern economy serve as money because

people have confidence that others will accept them as money.

If workers leave a country to seek out better opportunities in another country, then this will

shift the short-run aggregate supply curve of the original country to the left

If technological change occurs in the economy then

the long-run aggregate supply curve will shift to the right