macro final

Refer to the table above. If a bank has checkable deposits of $45 million and reserves of $2 million, then its excess reserves are:

$0.65 million

Refer to the table above. If a bank has $60 million in savings deposits and $40 million in checkable deposits, then its required reserves are:

$1.2 million

The economy is in a recession. The government enacts a policy to increase spending by $2 billion. The MPS is 0.2. What would be the full increase in real GDP from the change in government spending assuming that the aggregate supply curve is horizontal across the range of GDP being considered?

$10 billion

Suppose the Northwestern Bank has excess reserves of $12,000 and checkable deposits of $125,000. If the reserve requirement is 20 percent, what are the bank's actual reserves?

$37,000

Refer to the table above. The size of the M2 money supply is:

$4,330

Refer to the graph above for a private closed economy. The equilibrium level of GDP in this economy is:

$450 billion

Refer to the table above. The size of the M2 money supply is:

$5,899 billion

Refer to the graph above. Which line might represent an immediate-short-run aggregate supply curve?

2

Refer to the above data. Assume that investment Ig is not affected by the income GDP level. The multiplier for this private open economy is:

3.33

Refer to the above graph. The size of the multiplier associated with changes in government spending in this economy is

5.00

Which of the following fiscal policy changes would be the most contractionary?

A $10 billion increase in taxes and a $30 billion cut in government spending

Money is "created" when:

A bank grants a loan to a customer

A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of:

A change in real value of consumer wealth

The following factors explain the inverse relationship between the price level and the total demand for output, except:

A substitution effect

If the national incomes of our trading partners increase, then our

Aggregate demand increases because net exports increase

Refer to the graph above for a private closed economy. At the $150-billion level of GDP:

Aggregate expenditures are more than real GDP, so GDP will rise

The built-in stabilizers in the economy tend to:

Dampen the irregular swings in real GDP

Checkable deposits are:

Debts of commercial banks and savings institutions

An increase in personal income tax rates will cause a(n):

Decrease (or shift left) in aggregate demand

The intent of contractionary fiscal policy is to:

Decrease aggregate demand

Which of the following is an example of built-in stability? As real GDP decreases, income tax revenues

Decrease and transfer payments increase

Other things being equal, a decrease in an economy's exports will:

Decrease domestic aggregate expenditures and the equilibrium level of GDP

A decrease in government spending will cause a(n):

Decrease in aggregate demand

The interest rate effect on aggregate demand indicates that a(n):

Decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending

Actions by the Federal government that decrease the progressively of the tax system:

Decrease the effect of automatic stabilizers

In the aggregate expenditures model, the consumption schedule is shown to be:

Directly related to real income GDP

A commercial bank's checkable-deposit liabilities can be estimated by:

Dividing its required reserves by the reserve ratio

Saving is $15 billion at the $125 billion equilibrium level of output in a closed, private economy. Actual investment must be:

Equal to $15 billion

The paper currencies of the U.S. are also called:

Federal Reserve Notes

A bank is in the position to make loans when required reserves:

Are less than actual reserves

The slope of the immediate-short-run aggregate supply curve is based on the assumption that:

Both input and output prices are fixed

The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a:

Budget deficit

Refer to the graph above for a private closed economy. When output or income is $350 billion there will be:

Unplanned decreases in inventories

Refer to the graph above. A budget surplus would be associated with GDP level:

L

A bank has $2 million in checkable deposits. In the bank's balance sheet, this would be part of:

Liabilities

The real-balances effect on aggregate demand suggests that a:

Lower price level will increase the real value of many financial assets and therefore cause an increase in spending

Which definition(s) of the money supply include(s) only items which are directly and immediately usable as a medium of exchange?

M1

Money eliminates the need for a coincidence of wants in trading primarily through its role as a:

Medium of exchange

When loans are repaid at commercial banks:

Money is destroyed

Refer to the figure above. The economy is at equilibrium at point B. What would expansionary fiscal policy do?

Move the economy from point B towards point A

Refer to the graph above, in which Dt is the transactions demand for money, Dm is the total demand for money, and Sm is the supply of money. If the interest rate was 4 percent, the asset demand for money would be:

$200

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75. Aggregate expenditures must have fallen by:

$15 billion

Refer to the data above. If a check for $20,000 is drawn and cleared against this bank, it will then have excess reserves of:

$15,000

If nominal GDP is $800 billion and, on average, each dollar is spent four times in the economy over a year, then the quantity of money demanded for transactions purposes will be

$200 billion

When national income in other nations decreases, aggregate demand in our economy:

Decreases because our exports will decrease

Which of the following are liabilities to a bank?

Demand and time deposits

One major advantage of money serving as a medium of exchange is that it allows society to:

Escape the complications of barter

The main tools that the Fed can use to alter the reserves of commercial banks are the required-reserve ratio and the following, except:

Exchange rate

If Congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of a(n):

Expansionary fiscal policy

The lending ability of commercial banks increases when the:

Fed buys securities in the open market

When the Federal government uses taxation and spending actions to stimulate the economy it is conducting:

Fiscal policy

As of February 2013, more than half of the money supply (M1) was in the form of:

Checkable deposits

Discretionary fiscal policy is often initiated on the advice of the:

Council of Economic Advisers

Which of the following is not true about the use of a credit card?

Credit-card balances are part of M2, but not part of M1

The short-run version of aggregate supply assumes that product prices are:

Flexible while resource prices are fixed

The basic requirement for an item to function as money is that it be:

Generally accepted as a medium of exchange

The more progressive the tax system, the:

Greater is the built-in stability for the economy

Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that:

Help offset changes in GDP

An expected increase in the prices of consumer goods in the near future will:

Increase (or shift right) in aggregate demand now

An increase in productivity will:

Increase aggregate supply

Assume that the required reserve ratio is 20 percent. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the reserves at Bank A and Bank B?

Increase by $50,000 at Bank A, and decrease by $50,000 at Bank B

One major point that Keynes raised pertains to income and spending. He argued that:

Pessimism could cause aggregate spending to fall short of total output

The labels for the axes of an aggregate supply curve should be:

Real domestic output for the horizontal axis and price level for the vertical axis

The labels for the axes of the aggregate demand graph should be:

Real domestic output on the horizontal axis and the price level on the vertical axis

When required reserves exceed actual reserves, commercial banks will be forced to have borrowers:

Repay loans

Which would most likely shift the aggregate supply curve? A change in the prices of:

Resources

Leakages from the income-expenditure stream are:

Saving, taxes, and imports

If the government wishes to increase the level of real GDP, it might reduce:

Taxes

Which of the following "backs" the value of money in the United States?

The acceptability of it as a medium of exchange

Consumption is $141 billion, planned investment is $15 billion, and saving is $15 billion in a private, closed economy. At this level:

The economy is in equilibrium

When government spending is increased, the amount of the increase in aggregate demand primarily depends on:

The size of the multiplier

One reason that "near-monies" are important is because:

They can be easily converted into money or vice versa, and thereby can influence the stability of the economy

A bank's checkable deposits shrinks from $40 million to $33 million. What happens to its required reserves if the required reserve ratio is 3%?

They fall by about $0.2 million

The currency or money of the United States, like those of other countries, is:

Token money

Refer to the graph above, in which Dt is the transactions demand for money, Dm is the total demand for money, and Sm is the supply of money. The market is in equilibrium at the 6 percent rate of interest. If the money supply then decreases as shown, the transaction demand for money will change by:

$0

A commercial bank has checkable-deposit liabilities of $50,000 and a required-reserve ratio of 20 percent. What is the amount of required reserves?

$10,000

An individual deposits $12,000 in a commercial bank. The bank is required to hold 10 percent of all deposits on reserve at the regional Federal Reserve Bank. The deposit increases the loan capacity of the bank by:

$10,800

Refer to the graph above. If the equilibrium interest rate is 4 percent, the supply of money must be:

$100 billion

Refer to the table above. If the real rate of interest is 2%, then the equilibrium level of GDP will be:

$1200 billion

A depositor places $5,000 in cash in a commercial bank, and the reserve ratio is 20 percent; the bank sends the $5,000 to the Federal Reserve Bank. As a result, the reserves and excess reserves of the bank have been increased, respectively, by:

$5,000 and $4,000

Refer to the above table. The equilibrium real GDP is:

$600

Refer to the above table. If planned investments were fixed at $16, taxes were zero, government purchases of goods and services were zero, and net exports were zero, then equilibrium real GDP would be $630 initially. If government purchases were then raised from $0 to $4, other things constant, then the equilibrium real GDP would become:

$650

In a private closed economy where MPC = 0.8, if consumers reduce their spending by $10 billion and firms cut investments by $5 billion, then equilibrium GDP will decrease by:

$75 billion

Refer to the graph above. If the interest rate rises from 2 percent to 3 percent, the supply of money must have:

Decreased by $50 billion

Use the following list to answer the question about the money supply. Items 1. Money market mutual funds held by individuals 2. Savings deposits, including money market deposit accounts 3. Money market mutual funds held by businesses 4. Currency held by the public 5. Small time deposits 6. Checkable deposits Refer to the list above. The M2 money supply is composed of items:

1, 2, 4, 5, and 6

If the dollars held for transactions purposes are, on the average, spent four times a year for final goods and services, then the quantity of money people will wish to hold for transactions purposes is equal to:

25 percent of nominal GDP

Refer to the graph above. If the initial equilibrium interest rate was 5 percent and the money supply increased by $100 billion, then the new interest rate would be:

3 percent

Refer to the table above. Suppose that the transactions demand for money is equal to 20 percent of the nominal GDP, the supply of money is $800 billion, and the asset demand for money is that shown in the table. If the nominal GDP is $2000 billion, the equilibrium interest rate is:

5 percent

The required-reserve ratio is equal to:

A commercial bank's required reserves divided by its checkable-deposit liabilities

Refer to the graph above. Which of the following factors will shift AD1 to AD3?

A decrease in consumer wealth

Refer to the above graph. What combination would most likely cause a shift from AD1 to AD2?

A decrease in taxes and an increase in government spending

U.S. Treasury deposits at the Federal Reserve Banks are:

A liability of the Federal Reserve Banks and an asset for the U.S. Treasury

An asset's liquidity refers to its ability to be:

A means of payment

What function is money serving when you use it when you go shopping?

A medium of exchange

The investment schedule shows the:

Amounts business firms collectively intend to invest at each possible level of GDP

Refer to the graph above. Which of the following factors will shift AD1 to AD2?

An increase in national incomes abroad

Which of the following effects best explains the downward slope of the aggregate demand curve?

An interest-rate effect

The difference between the investment demand curve and the investment schedule is that the former shows:

An inverse relationship between investment and interest rate, while the latter shows no correlation between investment and income

In the above graph it is assumed that investment, net exports, and government expenditures:

Are independent of GDP

What is one significant characteristic of fractional reserve banking?

Banks can create money through lending their reserves

You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $500 billion; (2) investment = $50 billion; (3) government purchases = $100 billion; and (4) net export = $20 billion. If the full-employment level of GDP for this economy is $620 billion, then what combination of actions would be most consistent with closing the GDP-gap here?

Decrease government spending and increase taxes

When a bank accepts a checkable deposit from a customer, its deposits will increase and its excess reserves will:

Increase by less than the deposits

Which combination of fiscal policy actions would most likely offset each other?

Increase taxes and government spending

If bond prices decrease, then the

Interest rate increases

An increase in the money supply is likely to reduce:

Interest rates

The transactions demand for money will shift to th

Left when nominal GDP decreases

Which line in the graph above would best illustrate the supply of money curve?

Line 2

Which line in the graph above would best illustrate the transactions demand for money curve?

Line 2

Which one of the following is considered to be a "stock" rather than a "flow" variable?

Money

A bank's required reserves can be calculated by:

Multiplying its checkable-deposit liabilities by the reserve ratio

Refer to the graph above. Assume that the economy is in a recession with a price level of P1 and output level Q1. The government then adopts an appropriate discretionary fiscal policy. What will be the most likely new equilibrium price level and output?

P2 and Q2

The use of a debit card is most similar to:

Paying with a check

Refer to the graph above, in which Dt is the transactions demand for money, Dm is the total demand for money, and Sm is the supply of money. The market is initially in equilibrium at a 6 percent interest rate. If the money supply increases, then Sm2 will shift to:

Sm3 and the interest rate will be 4 percent

There is an asset demand for money primarily because of which function of money?

Store of value

Assume that the stock of money is determined by the Federal Reserve and does not change when the interest rate changes. This situation means that the:

Supply of money curve is vertical

Refer to the graph above. Which of the following factors does not explain a movement along the AD curve?

The expenditure multiplier effect

Currency and checkable deposits are:

The major components of money supply M1

A consumer holds money to meet spending needs. This would be an example of the:

Transactions demand for money

The functions of money are to serve as a:

Unit of account, store of value, and medium of exchange

When aggregate expenditure is greater than GDP, then there will be an:

Unplanned decrease in inventories and GDP will increase