Module 04 Exam Eco 252

Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The banks loans, if sold at current market value, would be worth $600 million. What is the total value of Stealth bank's assets? $1.3 billion $1.7 billion $970 million $470 million

$970 million

If nominal GDP is 1800 and the money supply is 450, then what is velocity? 25 4.5 4 22

4

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year. budget deficit budget surplus corporate tax regressive tax

a

A consensus estimate based on a number of studies suggests that if there is an increase in budget deficits (or a fall in budget surplus) by 1% of GDP, it will most likely cause which of the following? an increase of 0.5-1.0% in the long-term interest rate long and variable time lags in enacting the fiscal policy smaller impact due to temporary fiscal policy output above the potential GDP output level

a

Currently, the US government accumulated debt to GDP ratio: is lower than its historical high point. is higher than it has ever been. is lower than it has ever been. has remained relatively steady for the past decade.

a

If South Dakota's governor reports a budget surplus in 2011, that state government likely: received more in taxes than it spent in that year. increased the proportional tax level. equalized spending and taxes in that year. increased the corporate income tax rate.

a

If loans become far less available, then sectors of the economy that ______________ like business investment, home construction, and car manufacturing can be dealt a crushing blow. depend on borrowed money typically generate extraordinary gains make loans to financial capital markets failed to diversify risk

a

If the economy is at equilibrium as shown in the diagram below, then a contractionary monetary policy will: increase unemployment, but have little effect on inflation. increase unemployment and decrease inflation. increase output and increase inflation. have no effect on output, but increase inflation.

a

In macroeconomics, a _______________ describes the common way in which market values are measured in an economy. unit of account medium of exchange store of value unit of exchange

a

Stealth bank has deposits of $350 million. It holds reserves of $30 million and government bonds worth $70 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? $500 million $750 million $450 million $380 million

a

The central bank requires Southern to hold 10% of deposits as reserves. Southern Bank's policy prohibits it from holding excess reserves. If the central bank sells $25 million in bonds to Southern Bank which of the following will result? the money supply in the economy decreases Southern's net worth increases by $25 million decrease in Southern's bond assets by $25 million increase in Southern's loan assets of $25 million

a

The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life. an estate and gift tax; to the next generation a regressive tax; to non-family members an excise tax; to their children a progressive tax; to non-family members

a

The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy. an expansionary fiscal policy; an increase in government spending a contractionary fiscal policy; a reduction in taxes a contractionary fiscal policy; an increase in taxes an expansionary fiscal policy; an increase in corporate taxes

a

Which of the following is a valid criticism of the use of money as a store of value in modern economies? annual inflationary loss of buying power money supply is too narrowly defined storing money is wasteful imperfect as a unit of account

a

Banks typically come under financial stress because of: the money multiplier effect. a widespread decline in the value of their assets. diversification of loan assets. risks associated with extraordinary economic gains.

a widespread decline in the value of their assets.

In uncertain economic times, ____________________ serves as a way of preserving economic value that can be spent or consumed in the future. buying a new car owning gold refinancing your home mortgage obtaining a credit card

b

The quantitative easing policies adopted by the Federal Reserve are usually thought of as: short term loans to fill out reserves. temporary emergency measures. traditional monetary policies. a relatively weak tool.

b

The time lag for monetary policy is typically ________________ the time lag for fiscal policy. longer than shorter than about the same as the same as

b

When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following: a loose monetary policy. a contractionary monetary policy. a expansionary monetary policy. a quantitative easing policy.

b

When banks hold excess reserves because they don't see good lending opportunities: it negatively affects contractionary monetary policy. it negatively affects expansionary monetary policy. expansionary monetary policy is unaffected. contractionary monetary policy is unaffected.

b

Which of the following is considered to be a relatively weak tool of monetary policy? quantitative easing altering the discount rate reserve requirements reducing the money supply

b

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. proportional tax regressive tax progressive tax excise tax

c

By June, 2010, the U.S. government owed $13.6 trillion dollars ________________ that, over time, has remained unpaid. from decreases in excise tax from decreases in income tax in accumulated government debt from decreases in corporate tax

c

If Brent uses his credit card to purchase a new television, then the money to pay the retailer is taken from: his M1 funds. his M2 funds. the credit card company's M1 funds. the credit card company's M2 funds.

c

If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is: regressive. progressive. proportional. optional.

c

If the economy is in recession with high unemployment and output below potential GDP, then __________________ would cause the economy to return to its potential GDP? a tight monetary policy fewer loanable funds a loose monetary policy higher interest rates

c

If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be? leverage cycle bank runs fighting inflation bank supervision

c

In macroeconomics, _____________________________ describes a situation where a bank's liabilities can be withdrawn in the short-term while its assets are being repaid in the long-term. diversification reserve ratio an asset-liability time mismatch a negative net worth

c

The process of banks making loans in financial capital markets is intimately tied to the: redistribution of wealth. financial stress levels of banks. creation of money. home construction industry.

c

What do goods like gasoline, tobacco, and alcohol typically share in common? A progressive tax is imposed on each of them. A regressive tax is imposed on each of them. They are all subject to government excise taxes. They are all subject to government fiscal taxes.

c

When the central bank decides it will sell bonds using open market operations: interest rates decrease. the money supply increases. the money supply decreases. the money supply is unaffected.

c

Which of the following institutions determines the quantity of money in the economy as its most important task? U.S. Department of the Treasury Federal Open Market Committee Central Bank Federal Reserve Board of Governors

c

Why do banks use a T-account? if a bank has become bankrupt, net worth will be shown as a zero on the balance sheet the T-account separates the liabilities on the left from assets on the right the T-account separates assets on the left from liabilities on the right the T-account ensures the final entry made under the assets column is bank reserves

c

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the: aggregate supply curve will shift to the right. aggregate supply curve will shift to the left. aggregate demand curve will shift to the left. aggregate demand curve will shift to the right.

d

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used? discretionary contractionary standardized expansionary

d

If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be: an increase in payroll tax. an increase in excise tax. a budget surplus. a budget deficit.

d

Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? $110 million $710 million $480 million $510 million

d

The central bank uses a ____________________ monetary policy to offset business related economic contractions and expansions? laissez faire loose contractionary countercyclical

d

When the Federal Reserve announces that it is implementing a new interest rate policy, the ____________________ will be affected? real interest rate consumer lending rate nominal interest rate federal funds rate

d

In an economy with _______________, money loses some buying power each year, but it remains money. inflation currency deflation a market orientation

inflation