Macroeconomics Quiz 6

If the economy is experiencing a recession, how will a plan to decrease taxes for consumers and increase spending on government purchases affect real GDP and the price level? Select one: a. GDP falls and the price level falls b. GDP rises and the price level falls. c. GDP falls and the price level rises. d. GDP stays the same and price level rises. e. GDP rises and the price level rises

e

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20% 4. Refer to scenario 14-2. As a result of Kristy's deposit, checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of Select one: a. $50,000 b. $100,000 c. $10,000 d. additional information is needed to determine the answer

a

The quantity theory of money equation states that Select one: a. M x V = P x Y b. M + V = P + Y c. the money supply (M) divided by the velocity (V) equals the price level (P) divided by real output (Y), i.e., M/V = P/Y d. M - V = P -V

a

The quantity theory of money seeks to explain the connection between money and Select one: a. prices b. interest rates c. output d. unemployment

a

Automatic stabilizers refer to Select one: a. the money supply and interest rates that automatically increase or decrease along with the business cycle b. government spending and taxes that automatically increase or decrease along with the business cycle c. changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives d. changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives

b

7. Monetary policy refers to the actions the Select one: a. President and congress take to manage the money supply and interest rates to pursue their economic objectives b. Federal Reserve takes to manage government spending and taxes to pursue it economic objectives c. Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives d. President and congress take to manage government spending and taxes to pursue their economic objectives

c

A bank will consider a car loan to a customer _____________ and a customer's checking account to be a ___________ . Select one: a. a liability; an asset b. an asset; an asset c. an asset; a liability d. a liability; a liability

c

To deflate nominal GDP, you must Select one: a. divide nominal GDP by real GDP b. multiply real GDP by the GDP deflator c. divide nominal GDP by the GDP deflator d. divide real GDP by the GDP deflator e. multiply nominal GDP by the GDP deflator

c

Which of the following is not counted in M1? a. checking account balances b. currency in circulation c. credit card balances d. traveler's check balances e. coins and currency

c

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20% 3. Refer to scenario 14-2. As a result of Kristy's deposit, Bank A's reserves immediately increase by Select one: a. $2,000 b. $8,000 c. $50,000 d. $10,000

d

The best example of a negative supply shock to the economy would be Select one: a. an increase in the money supply b. a decrease in government spending c. a decrease in the real interest rate d. unexpectedly higher resource prices e. technological improvements

d

The largest and fastest growing category of federal government expenditures is Select one: a. infrastructure projects b. interest on the national debt c. grants to state and local governments d. transfer payments

d

Refer to Fig. 16-1 (found in Announcements) . Suppose the economy is in short-run equilibrium below potential GDP (also called full employment level of GDP) and congress and the President lower taxes to move the economy back to long-run equilibrium. Use the basic AD-AS model in the figure (16-1), this would be depicted as a movement from Select one: a. C to B b. A to E c. B to A d. B to C e. A to B

e

Suppose the economy is operating beyond full employment. Which of the following is true at this point? Select one: a. A decrease in AD will result in a lower price level if prices are sticky. b. The short-run AS curve is horizontal c. Further increases in AD will result in a lower price level d. The unemployment rate is higher than the natural rate of unemployment. e. Further increases in AD will not lower the unemployment rate, but will create inflation.

e