Macro Final

If the MPC is 0.8, what change in government spending is required to reduce total income by 60 billion

12 billion

The Federal Reserve system is divided into

12 districts

If the MPC in an economy is 0.75 and aggregate expenditures increase by 5 billion the equilibrium GDP will increase by

20 billion

Assume that the marginal propensity to consume in an economy is 0.75. If the economy's full employment real GDP is 900 billion and its equilibrium real GDP is 800 billion there is a recessionary expenditure gap of

25 billion

If the required reserve ratio were 15 percent, the value of the monetary multiplier would be

6.67

If the reserve ration is 25 percent, what level of excess reserves does a bank acquire when a customer deposits a 12000 check drawn on another bank

9000

Which of the following statements is correct

An increase in exports will tend to increase, and an increase in imports will tend to decrease, the equilibrium GDP

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

Are less than actual reserves

Which of the following is a monetary policy intended to rein in inflation

Decrease the money supply to shift the aggregate demand curve leftward

The interest rate that the Fed charges banks for loans to them is called

Discount Rate

The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation

Interest rates and wage rates have decreased

The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation?

Interest rates have increased

Which of the following Fed actions increases the excess reserves of commercial banks

Lower the reserve ratio

The following factors help explain the instability of investment, except...

Purchases of capital goods are usually nondiscretionary and cannot be postponed

Suppose the economy is at full employment with a high inflation rate. Which combination of policies is most likely to reduce the inflation rate

Sell government securities in the open market and decrease government spending

As the economy declines into a recession, the collection of personal income tax revenues automatically falls. This relationship best describes how the progressive income tax system...

Serves as an automatic stabilizer for the economy

Generally speaking, the greater the MPS, the..

Smaller would be the increase in income which results from an increase in consumption spending.

A television report stats: " The Federal Reserve will lower the discount rate for the fourth time this year." This report indicates that the Federal Reserve is most likely trying to

Stimulate the economy

Compared to fiscal policy, monetary policy has a much shorter

administrative lag

A fall in the prices of inputs will shift the aggregate

demand curve rightward

John Maynard Keynes developed the aggregate expenditures model in order to understand the

great depression

A decrease in expected returns on investment will most likely shift the AD curve to

the left because Ig will decrease

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

a medium of exchange

The crowding-out effect suggest that

Increases in government spending may reduce private investment

Fiscal policy is enacted through changes in

taxation and government spending

The relationship between the MPS and the MPC is such that

1-MPC= MPS

WHich event would most likely decrease an economy's exports

An appreciation of a nation's currency relative to foreign currencies

When the Fed wants to lower the Federal funds rate it

buys bonds from banks and the public

Assume that the economy is in a recession and there is a budget deficit. A strict balanced budget amendment that would require the Federal government to balance its budget during a recession would be

contractionary and worsen the effects of the recession

When the Fed acts as a lender of last resort it is performing its role of

controlling the money supply

If personal income taxes and business taxes increase, then this will

decrease aggregate demand and aggregate supply

The amount of consumption in an economy correlates

directly with the level of disposable income

A federal budget deficit exists when

federal government spending exceeds tax revenues

An economy characterized by high unemployment is likely to be

in a recessionary expenditure gap

Dissaving occurs when

income is less than consumption

The crowding out effect suggests that

increases in government spending may reduce private investment.

AN increase in the money supply is likely to reduc

interest rates

An increase in the money supply is likely to reduce

interest rates

A decrease in expected returns on investment will most likely shift the AD curve to the

left because Ig will decrease

In a recessionary expenditure gap the equilibrium of real GDP is

less than full-employment GDP

A checkable deposit at a commercial bank is a

liability to the depositor and an asset to the bank

Menu costs will

make prices inflexible downward

If you know that an increase in a household's disposable income from 35000 to 45000 leads to in increase in consumption from 30000 to 38000 the you can conclude that the

marginal propensity to consume is .8

Which of the following would be considered to be the most liquid

money market mutual funds

The purchase and sale of government securities by the Fed is called

open market operations

Which one of the following is a tool of monetary policy for altering the reserves of commercial banks

open-market operations

The federal funds rate is the rate that banks pay for loans from

other banks

A lower real interest rate typically induces consumer to

purchase more goods that are bought using credit

Leakages from the spending multiplier process are

savings, taxes, and imports

In an economy, for every 10 million increase in disposable income, saving increases by 2 million. It can be concluded that the

slope of the consumption schedules is .8

One timing problem with fiscal policy to counter a recession is a "recognition lag" that occurs between the

start of the recession an the time it takes to recognize that the recession has started

Which of the following serves as an automatic stabilizer in the economy

the progressive income tax