ECON1500 FINAL EXAM
Which of the following fed actions increases the money supply?
Decreasing the federal funds rate by buying government securities in the open market
According to the Ricardian equivalence theorem, and increase in government spending would:
Not to change aggregate demand as consumer spending with decreased by the opposite amount as the increase in G
Economists Typically are so smart that
They admit that although economics is a powerful analytical tool it ain't physics and consequently affective functional finance is very difficult to achieve
When the US government runs a deficit, the
Treasury has to sell bonds to finance the deficit Federal government tax revenues must be less than federal government spending
To increase the money supply, the Fed can:
Decrease the discount rate
If a Country's population is 10 million and its GDP is $113 Billion, it per capita output is:
$113 $1,130 $11,300 $113,000 $11,300
If the reserve requirement is 100%, and banks keep no excess reserves, a new deposit of $2000 will add _________ to the money supply
$2,000
Assume Covid bank has a reserve requirement of 50% and no excess reserves. If a new customer, Amy B, deposits $100 million, the bank can make a maximum new loan of:
$50 million
If the reserves of the banking system or 2000 billion dollars, how much money cut the reserves support if the required reserve ratio is 0.25 and banks hold no excess reserves?
$8,000 billion
Cares III received how many votes from republicans in the senate and house combined?
0
Suppose total deposits in the first Bank of commerce are $100,000 and required reserves are $10,000. Based on this information, the required reserve ratio is:
0.10
Suppose total deposits in Covid bank are $50,000 and required reserves are $25,000. Based on this information, the required reserve ratio is:
0.50
To decrease the money supply, the Fed can:
Conduct open market sales
From December 2019 to April 2020, the US lost approximately how many full-time jobs?
17 million
Which is/are true concerning the federal government response to the COVID-19 pandemic?
3 major relief packages passed Increase in spending 5 trillion dollars Increase in spending totaling approximately 140 percent of total 2019 revenue All of the above are correct All of the above are correct
If the reserve ratio is 0.20, the money multiplier is:
5.0
From April 2020 to February 2021, the US recovered approximately how many full-time job?
6.5 million
2020 Q2 GDP was what percent of 2019 Q4 Real GDP?
90 percent
2020 Q4 GDP was what percent of 2019 Q4 Real GDP?
98 percent
Which of the following factors will likely increase economic growth?
A $25.00 minimum wage Eliminating patents Increase in government spending Effective COVID vaccine Effective COVID vaccine
When the Fed sells government securities, the money supply:
Contracts
If the federal government has a budget surplus in a given year, the national debt will
Decrease
In terms of the AS-AD model, the COVID 19 recession is best thought of as caused by:
A combination of a decrease in supply and a decrease in demand.
In the short run, if the Fed undertakes expansionary monetary policy, the effect will be to shift the:
AD curve out to the right.
The focus of Classical growth model is
Aggregate demand Interest rates Investment Technology Investment
The focus of the new growth model is
Aggregate demand Interest rates Investment Technology Technology
Market economies have been successful in leading to economic growth because they have:
Allowed companies that pollute to avoid paying any penalty for doing so Ignored private property rights Channeled individual efforts toward production and growth Taken advantage of increased government subsidies Channeled individual efforts toward production and growth
Markets help to promote growth by:
Allowing for specialization Encouraging work Encouraging innovation All of the above are correct All of the above are correct
Which of the following monetary policies likely decreases aggregate demand and, in the short run, output?
An open market sale of government securities
Experience has shown that Keynesian, activist fiscal policies likely:
Are a reason the US has a large public debt
If Zions Bank needs reserves, it can
Borrow from the Fed at the discount rate, borrow from Wells Fargo at the Federal Funds rate
If the Fed wants to increase the money supply, it can:
Buy government securities
If the Fed wants to implement expansionary monetary policy, it might:
Buy government securities to reduce the federal funds rate
Which is not a tool of monetary policy?
Change the prime rate
All of the following will help the PPC shift out except which?
Competitive markets Enforcement of property rights Low saving rates Capital accumulation Low saving rates
If the federal funds rate begins to rise above the current range established by the federal reserve, the Fed would:
Conduct open market purchases
If the Fed wanted to take action to offset the recessionary effects of the COVID pandemic, it would:
Conduct open market purchases to increase the money supply.
All three COVID-19 relief bills included
Direct payments to individuals
Which is not a function of the Fed?
Directly financing U.S. budget deficits
The federal reserves response to the COVID-19 pandemic includes:
Dramatically increasing the money supply
The federal reserve's response to the COVID-19 pandemic includes
Driving the federal funds rate essentially zero Purchasing exceptionally large, by historical standards, amounts of Government securities.
Robert Lucas reflects the view of many economists when he argues that the most effective way to reduce world poverty is to:
Eliminate recessions Increase long-run growth Provide loans to developing countries Take money from those who are very wealthy and give to those who are very poor Increase long-run growth
As of March 2021, the actual deficit was _______, the cyclical deficit was _________, and the structural deficit was _________.
Exceptionally large by any standard, large, large.
The federal reserves response to the COVID-19 pandemic is best characterized as
Expansionary
The financial sector
Facilitates savings and investment Makes saving easier Promotes investment All of the above are correct All of the above are correct
Money
Facilitates trade and specialization
The group that is comprised of five presidents of the 12 regional federal reserve banks and seven federal reserve board of governors that gathers around a table to discuss whether to increase interest rates is the:
Federal Open Market Committee
Trade deficits are, at least in part, caused by:
Federal budget deficits
A key difference between functional finance and sound finance is that in the sound finance view the government should:
Follow a policy of laissez faire with respect to recessions
Which Is correct concerning the federal reserve's response to the COVID-19 pandemic?
For the second time in 12 years, it has dramatically increase the money supply
Which of the following are creditors of the US government debt as a result of owning US government securities?
Foreign individuals and firms The federal reserve Social Security trust fund All of the above All of the above
The view that the government should increase government Spending as necessary to combat a recession is:
Functional finance
Growth compatible institutions:
Have incentives built in that lead people to work hard and invest Encourage people to pursue activities that inhibit growth in others Allow people to gain income for themselves by hurting others Encourage people to spend a lot of time on vacations Have incentives built in that lead people to work hard and invest
Which of the following policies will likely decrease economic growth?
High taxes on working that decreases the labor force participation rate. Quality research and teaching universities. High rates of saving and investment. High taxes on entrepreneurs. High taxes on working that decreases the labor force participation rate.
Assuming an economy is initially at potential output, in the long run, expansionary monetary policy is expected:
Not to affect output in the long run
Contractionary monetary policy is most likely to:
Increase interest rates, reduce investment, decrease AD, and decrease output/income
When I bank bank loans out excess reserves, the money supply:
Increases
In the AS/AD model, expansionary monetary policy:
Increases both investment and aggregate demand
Funds in your checking account
Is a medium of exchange
A sophisticated financial sector
Is associated with high income nations
Fiscal policy typically:
Is difficult to implement quickly due to political issues
The total federal government debt:
Is larger than the US annual GDP As of March 2021, was approximately 28 trillion Has grown sharply over since 2008 All of the above are correct All of the above are correct
Assume Eve has 10 pounds of gold and issues 100 notes on animal skins which promises a pound of gold to the holder of the note. Eve is
Issuing commodity money Engaging in fractional reserve banking Applying a reserve requirement of 10% Both B and C are correct Both B and C are correct
Assume Eve has 10 pounds of gold and issues 10 notes an animal skins which promises a pound of gold to the holder of the note. Eve is
Issuing fiat money
Concerning Say's law, which of the following is/are correct?
It implies that President Biden's $1.9 trillion trillion spending bill will not affect economic growth Robert Lucas would likely disagree with its implications It is inconsistent with classical economics It is an important element of fiscal policy It implies that President Biden's $1.9 trillion trillion spending bill will not affect economic growth
On the federal reserves response to COVID-19, Professor Bowles is of the opinion that
It is contributing to price bubbles in certain markets It is essentially creating money to pay for the federal government spending It has kept interest rates artificially too low for too long, going back to the 2008 financial crisis All of the above All of the above
When the federal reserve buys government securities to finance deficit spending,
It is effectively creating money to finance spending The potential cost of this policy is inflation
On the federal reserves response to the COVID-19, Professor bowles is of the opinion that:
It seems aggressive and poses a risk of inflation
The federal government response to the COVID-19 pandemic is best characterized as:
Keynesian
Previous to the COVID pandemic, the actual deficit was ______, the cyclical deficit was ________, and the structural deficit was __________.
Large, zero, equal to the actual
US government budget deficits
Likely decrease investment Require the US treasury to sell bonds Likely increase interest rates All of the above are correct All of the above are correct
Which will increase the rate of capital accumulation?
Lower levels of investment Higher levels of investment Higher levels of saving Both B and C are correct Both B and C are correct
We can show economic growth in terms of the production possibility curve by:
Movement along the production possibility curve. Shifting from a point inside the curve to a point on the production possibility curve. Shifting the production possibility curve outward. Jumping to a point outside the production possibility curve. Shifting the production possibility curve outward.
Paying off the external public debt involves a:
Net reduction in domestic wealth
US external public that corresponds to treasury bonds (i.e., government securities) owned by:
Non US citizens
Per capita growth:
Occurs only when the population is growing Occurs only when output is growing Occurs when output increases faster than the population increases Always impressed the distribution of income Occurs when output increases faster than the population increases
Which of the following fed policies would be appropriate in a recessionary gap?
Open market purchases to lower the federal funds rate
Everything else remaining the same, as consumption decreases,
Private savings will increase The trade deficit will decrease
Paying off the internal public debt involve a
Redistribution of wealth among citizens of the country
Which of the following is a typical bank asset
Reserves and loans to customers
From a functional finance perspective, when the economy is in an inflationary gap, the government should:
Run a surplus
According to T Bowles, which of the following should be included in any list of great intellectual achievements of the human mind?
Save today for a better tomorrow A medium of exchange Fiat money All of the above All of the above
Which of the following would be most closely associated with the new growth theory?
Saving Investment Patents Labor force participation rates Patents
In the loanable funds market, a decrease in consumption would:
Shift the demand for loanable funds to the right Shift the supply of loanable funds to the right Shift the demand for loanable funds to the left Increase interest rates Shift the supply of loanable funds to the right
Which institutional arrangement is more consistent with high GDP per capita?
Socialism Restrictions on international trade Government imposed price controls Markets, Specialization and trade Markets, specialization and trade
The view that the government budget should typically be balanced, primarily based on the moral argument is
Sound finance
When money is held as an asset, it is serving as a:
Store of value
Keynesian economics
Suggests that deficit spending during a recession is a good thing Appears to have provided "cover" for politicians to support deficit spending Is likely a reason the US federal government has incurred a budget deficit in the great majority of the past 40 years All of the above are correct All of the above are correct
Which institutions can create money?
The Fed with an assist from banks
Open market operations are related to:
The Fed's buying and selling of government securities.
From whence do Government Securities originate?
The US treasury as a result of budget deficits
A bank has a reserve requirement of 0.10. If it has demand deposits of $100,000 and is holding $5000 in reserves:
The bank is not meeting it's reserve requirement
Which of the following statements is true?
The dead is a stock measure in the deficit or surplus is a flow measure
If the snivel Coronavirus permanently decreases the rate of growth of labor productivity,
The income distribution will likely become less equal Growth in per capita income will be lower than it otherwise would have been Economic growth will be lower than it otherwise would have been Both B and C are correct Both B and C are correct
Historically, the effect of economic growth generally has been to make:
The poor poorer and the rich richer The poor richer and the rich poorer All income levels richer The rich richer but not affect the poor All income levels richer
Everything else remaining the same as government spending increases
The trade deficit will increase
If national saving is negative,
There will be a trade deficit Imports will exceed exports
When the US government pays interest on its internal debt owed by the Fed,
US national income does not change
Financial markets are a key institution for growth because:
Without them people could now save Without them there would be no investment They promote saving and investment They allow people to plan better for retirement They promote saving and investment
M1 includes which of the following?
checking account deposits
