Macro - 9,10,13,14
Assume that banks are always fully loaned and people hold no cash. Given a required reserve ratio of 10%, an infusion of $100 billion in reserves will result in a maximum of:
$1,000 billion in deposits.
How many Federal Reserve districts are there?
12
Which of these factors will cause the aggregate demand curve to shift?
A change in the expectations of households and firms
Which of these fiscal policy actions will increase real GDP in the short run?
An increase in government expenditures
Which of these facts is true about the creation of the Federal Reserve System (the Fed)?
The Fed was created in 1913
An unexpected change in the price of oil would be called __________ by economists.
a supply shock
A bank's balance sheet is an accounting statement that shows a bank's;
sources and uses of funds
If the MPC is 0.8, then a $100 million increase in government expenditures will increase equilibrium GDP by __________.
$500 million
If the marginal propensity to save (MPS) is 0.2, how much additional consumption will result from an increase of $100 billion in disposable income?
$80 billion
If the marginal propensity to consume (MPC) is 0.9, how much additional consumption will result from an increase of $100 billion in disposable income?
$90 billion
Economist Anil Kashyap of the University of Chicago found that prices of many items published in retail catalogs are considerably _______, but during periods of ______________, prices change more frequently because of ______________________________.
1- sticky 2- high inflation 3- increase in the cost of production
Which of these will shift the money demand curve to the right?
An increase in real GDP
Which of these statements best describes the scenario shown in these graphs?
An open market purchase leads to an increase in the money supply which causes interest rates to fall and investment spending to rise.
Which of these is an example of an automatic stabilizer?
An unemployment benefit program
How can government policies shift the aggregate demand curve to the right?
By increasing government purchases
What is the largest component of the federal budget?
Entitlements and mandatory spending
Which of these is the broadest definition of the money supply?
M2
Which body of the Federal Reserve System sets the majority of U.S. monetary policy?
The Federal Open Market Committee
In the short run, when prices are slow to adjust to changes in demand and supply, _____________ determines production
demand
Because of the __________ in forecasting the economy, many economists believe the Fed __________ take a very active role in trying to stabilize the economy.
difficulties, should not
All of these will most likely increase as a result of expansionary monetary policy except:
government purchases.
A higher domestic price level will result in:
higher imports
The Fed selling bonds on the open market could impact fiscal policy due to;
higher interest rates on the debt
Credit cards are:
not part of the money supply
The economy is in long-run equilibrium when the short-run aggregate supply and the aggregate demand curve intersect at a point:
on the long-run aggregate supply curve
The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals:
one.
The demand to hold money for reasons of safety is known as:
speculative demand.
Many economists believe that tinkering with the economy via fiscal policy is not effective due to:
the presence of lags
When the interest rate decreases, __________.
there is movement down a stationary money demand curve
The demand for money that represents the needs or desires of individuals or firms to make purchases is called __________.
transaction demand
The wages of which of the following groups will NOT adjust quickly?
union workers
Which of these shifts the aggregate demand curve to the right?
Lower interest rates
Which of these policies affects the economy through intended changes in the money supply?
Monetary policy
When many depositors decide simultaneously to withdraw their money from a bank, there is __________.
a bank run
When the Federal Reserve buys bonds on the open market, it will ultimately translate to in net exports.
an increase
Taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called __________.
automatic stabilizers
The federal funds rate is the interest rate that;
banks charge each other for loans.
The money multiplier for the United States is __________.
between 2 and 3
Every time the federal government runs a budget deficit, the Treasury must:
borrow funds from savers by selling U.S. Treasury securities.
Changes in tax rates impact the economy through:
both aggregate demand and aggregate supply.
According to the graph, in this economy there will be a tendency for
both wages and prices to rise over time
A government that collects more in taxes than it spends experiences a:
budget surplus
Supply-side economists point to the Laffer curve as evidence that higher taxes:
can lead to lower overall government revenues.
Most nations have a banker's bank which is also known as the nation's;
central bank
Stagflation is a
combination of inflation and recession
In the short run, a supply shock as a result of an unexpected decrease in oil prices will:
decrease the price level but increase real GDP
There are _____________ lags, which refer to the time it takes to formulate a policy, and _______________ lags, which refer to the time it takes for the policy to actually work.
inside, outside
According to the graph, the situation of this economy after the supply shock can be called:
stagflation
The Federal Reserve System is __________.
the central bank of the United States
_______________ is the component of consumption that is independent of income.
Autonomous consumption
___________ is money that has no intrinsic value but is backed by the government.
Fiat money
When is the opportunity cost of holding money higher?
When interest rates are high
If the Federal Reserve wishes to decrease the money supply to slow the economy, it will conduct:
an open market sale.
The federal funds rate is the rate:
at which banks lend to each other.
When the economy is at full employment, a cut in household taxes will __________.
increase consumption
The Federal Reserve is set up to be _______________ the political system.
independent of
The name given to the fraction of deposits that a bank is legally required to hold in its vault, or as deposits at the Fed, is __________.
required reserves
The aggregate demand and aggregate supply model explains:
short-run fluctuations in real GDP and the price level
Supply-side economics emphasizes the role that __________ play in the supply of output in the economy.
taxes
The relationship between the level of income and consumer spending is called;
the consumption function.
In the long-run, the level of output is;
the full-employment level of output.
The amount by which consumption spending increases when disposable income increases is called __________.
the marginal propensity to consume
If real GDP increases
the money demand curve shifts to the right.
If the price level increases, __________.
the money demand curve shifts to the right.
If the FOMC orders the trading desk to sell Treasury securities:
the money supply curve will shift to the left and the equilibrium interest rates will rise.
If firms reduce investment spending and the economy enters a recession, which of these contributes to the adjustment that causes the economy to return to its long-run equilibrium?
The eventual agreement by workers to accept lower wages
Which of these graphs depicts the impact of a decrease in the aggregate price level?
The graph on the right
If the federal government's expenditures are less than its revenue, there is a __________.
budget surplus
Which of the following is not a component of aggregate demand?
business taxes
All the programs that Congress authorizes on an annual basis, which are not automatically funded by the prior laws passed by Congress, are called __________.
discretionary spending
Assuming there are no leakages out of the banking system, a money multiplier equal to 5 means that:
each additional dollar of reserves creates $5 of deposits.
The American Recovery and Reinvestment Act of 2009 is a clear example of:
expansionary fiscal policy.
Government policies that increase aggregate demand are called __________.
expansionary policies
When we say that money serves as a unit of account, we mean that:
Prices are quoted in terms of money
Which of these is NOT a function of the Federal Reserve?
Providing identity theft insurance
The aggregate demand curve shows the relationship between:
The price level and the quantity of real GDP demanded
When the economy is in a recession, the government can:
increase government purchases or decrease taxes in order to increase aggregate demand.
Budget deficits automatically __________ during recessions and __________ during expansions.
increase, decrease
A bank panic occurs when:
many banks experience runs at the same time
According to the graph, if the solid line represents the GDP without policy and the dotted line includes policy, which side shows an ill-timed stabilization policy?
B
Which type of fiscal policy would cause the move of the AD curve represented in this graph?
Higher government spending
According to the graph, an increase in government spending, all else equal, will shift the AD curve from the initial AD curve to the curve labeled:
Increased AD
Which of these would be a fiscal policy the government might want to use if the economy is operating at too high a level of output?
Increasing income tax rates
Which of these are the largest sources of federal government revenues?
Individual income taxes and social security withholdings
The sum of all currency in the hands of the public plus demand deposits and other checkable deposits plus traveler's checks is the official definition of:
M1
The actions the Federal Reserve takes to manage the money supply and interest rates in order to pursue economic objectives are called __________.
Monetary policy
If the FOMC decides to increase the money supply, it orders the trading desk at the Federal Reserve Bank of New York to:
buy U.S. Treasury securities
To increase the money supply, the FOMC directs the trading desk located at the Federal Reserve Bank of New York to:
buy U.S. Treasury securities from the public.
The demand for money needed to make quick purchases on short notice without incurring high costs is known as the __________.
liquidity demand for money
On the balance sheet of a bank:
loans are the most important asset.
When interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is __________ , so the quantity of money demanded will be __________.
low, high
According to supply-side theory, fiscal policymakers can combat the impact of recessions by:
lowering tax rates.
When we say that one of the functions of the Fed is to be a lender of last resort, we mean that the Fed:
provides funds to troubles banks that cannot find any other source of funds
In recent times, the Federal Reserve has increased the money supply aggressively through buying bonds. This practice has been dubbed;
quantitive easing
In professional football, salaries are determined by the league for the first several years, but then the athletes have a chance to become free agents and seek employment with other teams. When they are under contract, the athletes have
sticky wages but they become flexible when they become free agents
Which of these factors will shift the short-run aggregate supply to the left?
A decrease in the size of the labor force
The Board of Governors of the Federal Reserve has _________ members that are appointed for staggered _________ by the __________ and confirmed by the Senate.
Seven, 14-year terms, President
The wealth effect refers to the fact that:
when the price level falls, the real value of household wealth rises, and so will consumption
The Fed conducts monetary policy primarily through:
open market operations.
For most firms, the biggest cost of doing business is
wages
