question
an increase in the price level will cause a ________ the AD curve
answer
movement up along
question
an increase in government purchases will cause a ________ the AD curve
answer
-rightward shift of
question
an increase in state income taxes will cause a ________ the AD curve
answer
leftward shift of
question
an increase in interest rates will cause a _______ the AD curve
answer
leftward shift of
question
a faster income growth in other countries will cause a _________ the U.S. AD curve
answer
rightward shift of
question
on a graph with point B and point A on AD1 and right shift to point C on AD2
indicate which of the following would cause a shift in the AD curve from point A to point C
a. lower interest rates
b. decrease in the U.S. exchange rate relative to other currencies
c. inflation
d. decrease in the price level
e. lower taxes
f. increased consumer optimism
indicate which of the following would cause a shift in the AD curve from point A to point C
a. lower interest rates
b. decrease in the U.S. exchange rate relative to other currencies
c. inflation
d. decrease in the price level
e. lower taxes
f. increased consumer optimism
answer
a. lower interest rates
b. decrease in the us exchange rate
e. lower taxes
f. increased consumer optimism
b. decrease in the us exchange rate
e. lower taxes
f. increased consumer optimism
question
on a graph with point B and point A on AD1 and right shift to point C on AD2
A movement from point A to point B on AD1 could be the result of a
a. change in the cost of production
b. change in the price level
c. natural disaster
d. change in government policies
A movement from point A to point B on AD1 could be the result of a
a. change in the cost of production
b. change in the price level
c. natural disaster
d. change in government policies
answer
b. change in the price level
question
on a graph with point B and point A on AD1 and right shift to point C on AD2
A movement from point A to point C could be the result of a
a. change in the cost of production
b. change in the price level
c. natural disaster
d. change in the expectations of households
A movement from point A to point C could be the result of a
a. change in the cost of production
b. change in the price level
c. natural disaster
d. change in the expectations of households
answer
d. change in the expectations of households
question
Which one of the following is not true when the economy is in macroeconomic equilibrium?
A.When the economy is at long-run equilibrium,
SRAS =AD=LRAS.
B.When the economy is at long-run equilibrium,
actual GDP=potential GDP.
C.When the economy is at long-run equilibrium,
total unemployment =frictional unemployment +structural unemployment.
D.When the economy is at long-run equilibrium, firms will have excess capacity.
A.When the economy is at long-run equilibrium,
SRAS =AD=LRAS.
B.When the economy is at long-run equilibrium,
actual GDP=potential GDP.
C.When the economy is at long-run equilibrium,
total unemployment =frictional unemployment +structural unemployment.
D.When the economy is at long-run equilibrium, firms will have excess capacity.
answer
d. when the economy is at long-run equilibrium, firms will have excess capacity
question
on a graph with point A and B on SRAS1 and a left shift to SRAS2 with point C
1. changes in the price level causes a _________ the short-run aggregate supply (SRAS) curve. In the figure, this is shown by moving from point ____ to ___.
2. a change in any factor causes a ________ the SRAS curve. In the figure, this is shown by moving from point ___ to ___.
1. changes in the price level causes a _________ the short-run aggregate supply (SRAS) curve. In the figure, this is shown by moving from point ____ to ___.
2. a change in any factor causes a ________ the SRAS curve. In the figure, this is shown by moving from point ___ to ___.
answer
1. movement along; A to B
2. shift in; B to C
2. shift in; B to C
question
short run:
long run:
long run:
answer
short run fluctuations in the price level and real GDP
-shifts in AD curve are caused by changes in the demand for any of the components of real GDP:
1. consumption (C)
2. Investment (I)
3. net exports (NX)
4. government purchases (G)
long run shows the potential (Y*), or full employment GDP
-in the long run, real GDP is determined by:
1. number of workers
2. physical capital
3. level of technology
-shifts in AD curve are caused by changes in the demand for any of the components of real GDP:
1. consumption (C)
2. Investment (I)
3. net exports (NX)
4. government purchases (G)
long run shows the potential (Y*), or full employment GDP
-in the long run, real GDP is determined by:
1. number of workers
2. physical capital
3. level of technology
question
a monetary policy change that causes a decrease in interest rate causes a shift to the left from AD1 to AD2. This would cause a similar shift in the AD cure if there was
answer
a decrease in taxes
question
Which of the following causes the short-run aggregate supply curve to shift to the right?
A.a higher expected future price level
B.a positive technological change
C.an increase in the expected price of an important natural resource
D.a decrease in the capital stock
A.a higher expected future price level
B.a positive technological change
C.an increase in the expected price of an important natural resource
D.a decrease in the capital stock
answer
b. a positive technological change
question
which of the following causes the short-run aggregate supply curve to shift to the left?
a. a positive technological change
b. an increase in the expected price of an important natural resource
c. an increase in productivity
d. an increase in the labor force
a. a positive technological change
b. an increase in the expected price of an important natural resource
c. an increase in productivity
d. an increase in the labor force
answer
b. an increase in the expected price of an important natural resource
question
graph with point A on SRAS1 and a shift to left with SRAS2 having point B and point C
1. an increase in the labor force or capital stock is illustrated as a __________
2. an increase in the expected price of an important natural resource is indicated by ________
3. an improvement in technology is shown as a _________
4. an increase in the expected future price level causes
1. an increase in the labor force or capital stock is illustrated as a __________
2. an increase in the expected price of an important natural resource is indicated by ________
3. an improvement in technology is shown as a _________
4. an increase in the expected future price level causes
answer
1. shift from A to B
2. shift from B to A
3. shift from A to B
4. shift from B to A
2. shift from B to A
3. shift from A to B
4. shift from B to A
question
Which of the following statements is true?
A.
In the long run, changes in the price level may either increase or decrease real GDP.
B.
In the long run, increases in the price level result in an increase in real GDP.
C.
In the long run, increases in the price level result in a decrease in real GDP.
D.
In the long run, changes in the price level do not affect the level of real GDP.
A.
In the long run, changes in the price level may either increase or decrease real GDP.
B.
In the long run, increases in the price level result in an increase in real GDP.
C.
In the long run, increases in the price level result in a decrease in real GDP.
D.
In the long run, changes in the price level do not affect the level of real GDP.
answer
d. in the long run, changes in the price level do not affect the level of real GDP
question
Which of the following factors will cause the long-run aggregate supply curve to shift to the right?
A.
the accumulation of more machinery and equipment
B.
an increase in the number of workers in the economy
C.
technological change
D.
All of the above.
A.
the accumulation of more machinery and equipment
B.
an increase in the number of workers in the economy
C.
technological change
D.
All of the above.
answer
d. all of the above
question
How does the dynamic model of aggregate supply and aggregate demand explain inflation?
A.
by showing that if total production in the economy grows faster than total spending, prices will rise
B.
by showing that increases in labor productivity usually lead to increases in prices
C.
by showing that if total spending in the economy grows faster than total production, prices will rise
D.
None of the above.
A.
by showing that if total production in the economy grows faster than total spending, prices will rise
B.
by showing that increases in labor productivity usually lead to increases in prices
C.
by showing that if total spending in the economy grows faster than total production, prices will rise
D.
None of the above.
answer
c. by showing that if total spending in the economy grows faster than total production, prices will rise
question
The position of the long-run aggregate supply (LRAS) curve is determined by
A.
the price level, the available technology, and "sticky" prices.
B.
the price level and aggregate demand.
C.
consumption, investment, government purchases, and net exports.
D.
the number of workers, the amount of capital, and the available technology.
A.
the price level, the available technology, and "sticky" prices.
B.
the price level and aggregate demand.
C.
consumption, investment, government purchases, and net exports.
D.
the number of workers, the amount of capital, and the available technology.
answer
d. number of workers, amount of capital, and available technology
question
aggregate demand curve shows the relationship between _____ and _______
answer
the price level; output demanded
question
The aggregate demand curve is downward sloping because
A.
as income increases it causes an increase in the amount of planned expenditures.
B.
an increase in the price of a good causes a decrease in market demand for that good.
C.
an increase in the price level reduces real money holdings, which reduces the amount of expenditures.
D.
a decrease in government spending reduces prices and makes consumption demand increase.
A.
as income increases it causes an increase in the amount of planned expenditures.
B.
an increase in the price of a good causes a decrease in market demand for that good.
C.
an increase in the price level reduces real money holdings, which reduces the amount of expenditures.
D.
a decrease in government spending reduces prices and makes consumption demand increase.
answer
c. an increase in the price level reduces real money holdings, which reduces the amount of expenditures
question
Aggregate demand (AD) is comprised of expenditure components that include:
A.
government spending, consumption, investment, and net exports.
B.
consumption, investment, exports, and taxes.
C.
government spending, taxes, exports, and labor.
D.
consumption, government spending, exports, and labor.
A.
government spending, consumption, investment, and net exports.
B.
consumption, investment, exports, and taxes.
C.
government spending, taxes, exports, and labor.
D.
consumption, government spending, exports, and labor.
answer
a. gov spending, consumption, investment, and net exports
question
how does a decrease in the price level affect the quantity of real GDP supplied in the long-run?
answer
changes in the price level do not affect the level of GDP in the long run
question
How can government policies shift the aggregate demand curve to the right?
A.
by increasing government purchases
B.
by increasing business taxes
C.
by increasing personal income taxes
D.
All of the above.
A.
by increasing government purchases
B.
by increasing business taxes
C.
by increasing personal income taxes
D.
All of the above.
answer
a. by increasing gov purchases
question
when sellers are willing to accept money in exchange for goods and services, money is acting as a
answer
medium of exchange
question
Which of the following is not a correct statement about M2?
A.
M2 includes all of the assets in M1.
B.
M2 is a broader definition of money compared to M1 and currency.
C.
M2 includes savings accounts, small-denomination time deposits, and money market mutual funds.
D.
M2 is the best definition of money as a medium of exchange.
A.
M2 includes all of the assets in M1.
B.
M2 is a broader definition of money compared to M1 and currency.
C.
M2 includes savings accounts, small-denomination time deposits, and money market mutual funds.
D.
M2 is the best definition of money as a medium of exchange.
answer
d. M2 is the best definition of money as a medium of exchange
question
if you move $100 from your saving account to your checking account, then M1 will _______ and M2 will ___________
answer
M1 will increase by $100
M2 will remain the same
M2 will remain the same
question
what is a "classic type of run"?
answer
many depositors simultaneously decide to withdraw their money from a bank
question
why would deposit insurance provide the banking system with protection against runs?
A.
To be covered by deposit insurance, depositors must agree not to withdraw all their funds without notice.
B.
Deposit insurance guarantees that banks cannot go out of business by losing deposits.
C.
Since most depositors are insured, it is less likely that panicked buyers will simultaneously withdraw funds.
D.
Deposit insurance guarantees all deposits, and thus there is no incentive to withdraw funds
A.
To be covered by deposit insurance, depositors must agree not to withdraw all their funds without notice.
B.
Deposit insurance guarantees that banks cannot go out of business by losing deposits.
C.
Since most depositors are insured, it is less likely that panicked buyers will simultaneously withdraw funds.
D.
Deposit insurance guarantees all deposits, and thus there is no incentive to withdraw funds
answer
c. since most depositors are insured it is less likely that panicked buyers will simultaneously withdraw funds
question
which of the following is NOT a function of money?
a. unit of account
b. store of value
c. medium of exchange
d. acceptability
a. unit of account
b. store of value
c. medium of exchange
d. acceptability
answer
d acceptability
question
The use of money
A.
allows for greater specialization.
B.
reduces the transaction costs of exchange.
C.
eliminates the double coincidence of wants.
D.
all of the above.
A.
allows for greater specialization.
B.
reduces the transaction costs of exchange.
C.
eliminates the double coincidence of wants.
D.
all of the above.
answer
d all of the above
question
Which of the following is a monetary policy LOADING... tool used by the Federal Reserve Bank?
A.
Buying $500 million worth of government securities, such as Treasury bills.
B.
Increasing the reserve requirement from 10 percent to 12.5 percent.
C.
Decreasing the rate at which banks can borrow money from the Federal Reserve.
D.
All of the above
A.
Buying $500 million worth of government securities, such as Treasury bills.
B.
Increasing the reserve requirement from 10 percent to 12.5 percent.
C.
Decreasing the rate at which banks can borrow money from the Federal Reserve.
D.
All of the above
answer
d. all of the above
question
When the Federal Reserve purchases Treasury securities in the open market,
A.
the sellers of such securities deposit the funds in their banks and bank reserves increase.
B.
the sellers of such securities buy new securities in the open market and there is an increase in bank reserves.
C.
the buyers of these securities pay for them with checks drawn on their bank account and bank reserves increase.
D.
the public starts buying houses and firms invest in anticipation of bank increasing their reserves.
A.
the sellers of such securities deposit the funds in their banks and bank reserves increase.
B.
the sellers of such securities buy new securities in the open market and there is an increase in bank reserves.
C.
the buyers of these securities pay for them with checks drawn on their bank account and bank reserves increase.
D.
the public starts buying houses and firms invest in anticipation of bank increasing their reserves.
answer
a. the sellers of such securities deposit the funds in their banks and bank reserves increase
question
When the Federal Reserve sells Treasury securities in the open market,
A.
the buyers of these securities pay for them with checks and bank reserves fall.
B.
the sellers of such securities deposit the funds in their banks and bank reserves decrease.
C.
the buyers of such securities buy new securities in the open market and there is a decrease in bank reserves.
D.
the public starts selling houses and firms disinvest in anticipation of banks decreasing their reserves
A.
the buyers of these securities pay for them with checks and bank reserves fall.
B.
the sellers of such securities deposit the funds in their banks and bank reserves decrease.
C.
the buyers of such securities buy new securities in the open market and there is a decrease in bank reserves.
D.
the public starts selling houses and firms disinvest in anticipation of banks decreasing their reserves
answer
a.the buyers of these securities pay for them with checks and bank reserves fall.
question
the US dollar can best be described as
answer
flat money
question
Which of the following is not a policy tool the Federal Reserve uses to manage the money supply?
A.
Changing Income tax rates.
B.
Reserve requirements.
C.
Discount policy.
D.
Open market operations.
A.
Changing Income tax rates.
B.
Reserve requirements.
C.
Discount policy.
D.
Open market operations.
answer
a. changing income tax rates
question
true false
banks must hold a fraction of their deposits as vault cash or with the Federal Reserve
banks must hold a fraction of their deposits as vault cash or with the Federal Reserve
answer
true
question
M1 includes more than just currency because
A.
other assets can also be used to make transactions to buy goods and services.
B.
the federal mint makes a profit from printing currency as dollar bills.
C.
the government wants to be able to quote that there is a large amount of money in the economy.
D.
people hold money as other stores of value such as savings accounts and money market mutual funds.
A.
other assets can also be used to make transactions to buy goods and services.
B.
the federal mint makes a profit from printing currency as dollar bills.
C.
the government wants to be able to quote that there is a large amount of money in the economy.
D.
people hold money as other stores of value such as savings accounts and money market mutual funds.
answer
a. other assets can also be used to make transactions to buy goods and services
question
The amount of U.S. currency outstanding averages to about $2,800 per person in the U.S.
This large amount of currency per person can be partially explained because
A.
many U.S. dollars are held outside of the country by foreigners.
B.
rich people hold massive amounts of currency in vaults and safes, which makes the average large.
C.
most people carry large quantities of currency in their wallets and purses.
D.
All of the above.
This large amount of currency per person can be partially explained because
A.
many U.S. dollars are held outside of the country by foreigners.
B.
rich people hold massive amounts of currency in vaults and safes, which makes the average large.
C.
most people carry large quantities of currency in their wallets and purses.
D.
All of the above.
answer
a. many US dollars are held outside of the country by foreigners
question
Suppose the reserve requirement is 15%. What is the effect on total checkable deposits in the economy if bank reserves increase by $60 billion?
answer
60/.15= 400
c. $400 billion increase
c. $400 billion increase
question
which of the following is the largest liability of a typical bank?
answer
deposits
question
which of the following refers to the minimum fraction of deposits banks that are required by law to keep as reserves?
answer
the required reserve ratio
question
_____ is currency plus checking deposits
_____ is the value of assets minus debts
_____ is the value of assets minus debts
answer
money
wealth
wealth
question
in addition to the federal reserve bank, what other economic actors influence the money supply?
answer
households, firms, and banks
question
an initial increase in a banks reserves will increase checkable deposits
A.
by an amount greater than the increaseincrease in reserves.
B.
by an amount equal to the increaseincrease in reserves.
C.
by an amount less than the increaseincrease in reserves.
D.
An initial increaseincrease in reserves will decreasedecrease checkable deposits
A.
by an amount greater than the increaseincrease in reserves.
B.
by an amount equal to the increaseincrease in reserves.
C.
by an amount less than the increaseincrease in reserves.
D.
An initial increaseincrease in reserves will decreasedecrease checkable deposits
answer
a. by an amount greater than the increase in reserves
question
what is money
answer
money is any asset that people are generally willing to accept in exchange for goods and services
question
what are the 5 characteristics of money
answer
1. the good must be ACCEPTABLE to most people
2. it should be DURABLE (the value is not lost by storage)
3. it should be DIVISIBLE (you can make change out of it)
4. it is FUNGIBLE
It should be VALUABLE RELATIVE TO IT WEIGHT, so that it can easily be transported even in large quantities
2. it should be DURABLE (the value is not lost by storage)
3. it should be DIVISIBLE (you can make change out of it)
4. it is FUNGIBLE
It should be VALUABLE RELATIVE TO IT WEIGHT, so that it can easily be transported even in large quantities
question
do debit/credit cards count as money?
answer
-debit cards directly access checking accounts, but the card is not money, the checking account balance is
-credit cards are a convenient way to obtain a short-term loan from the bank issuing the card
-so credit and debit cards do not represent money
-credit cards are a convenient way to obtain a short-term loan from the bank issuing the card
-so credit and debit cards do not represent money
question
unit of account
answer
it allows a way of measuring value in a standard manner (it has numbers on it)
-ex: an ounce of pure gold has the same value all over the planet
-ex: an ounce of pure gold has the same value all over the planet
question
store of value
answer
a means of holding purchasing power over time
-it is limit in quantity that has the reason it maintain its purchasing power ex: gov can't create gold
-it is limit in quantity that has the reason it maintain its purchasing power ex: gov can't create gold
question
what is an asset & asset liquidity
answer
an asset is anything of value that can be converted into cash
how fast and easy it can be converted into cash
how fast and easy it can be converted into cash
question
how do we measure the total money in circulation in a country
answer
money supply
question
how do we measure money supply
answer
the federal reserve calculates the size of two money aggregates
M1: is the narrowest definition of the money supply currency (banknotes and coins)
checking accounts deposits in banks
travelers checks
M2: the broader definition of the money supply
(M1 + saving deposits + small time deposits)
Money market mutual funds
M1: is the narrowest definition of the money supply currency (banknotes and coins)
checking accounts deposits in banks
travelers checks
M2: the broader definition of the money supply
(M1 + saving deposits + small time deposits)
Money market mutual funds
question
what do banks do?
what is their comparative advantage?
what is their comparative advantage?
answer
-they extend credits to borrowers using funds raised from savers
-banks specialize in evaluating the quality of borrowers
-banks specialize in evaluating the quality of borrowers
question
what are the primary functions of the federal reserve?
answer
1. REGULATES BANKS (oversees the banking system) to ensure they follow federal laws intended to promote safe and sound banking practices
2. ACTS AS A BANKERS BANK making loans to banks (as a lender of last resort)
3. CONDUCTS MONETARY POLICY by controlling the money supply
2. ACTS AS A BANKERS BANK making loans to banks (as a lender of last resort)
3. CONDUCTS MONETARY POLICY by controlling the money supply
question
define open market operations:
when the fed sells government bonds, money supply _______
when the fed buys government bonds, money supply _______
when the fed sells government bonds, money supply _______
when the fed buys government bonds, money supply _______
answer
the fed conducts open-market operations when it buys government bonds from or sells government bonds to the public
-decreases
-increases
-decreases
-increases
question
increase in the reserve deposit ratio (R) ________ money supply
answer
decreases
question
a decrease in the reserve deposit ratio (R) _______ money supply
answer
increases
question
In a recessionary gap the FED will ___________
In an expansionary gap the FED will ________
In an expansionary gap the FED will ________
answer
-ease monetary policy
-tighten monetary policy
-tighten monetary policy
question
process by which the central bank controls the money supply, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency
answer
monetary policy
question
monetary policy goals
answer
1. price stability (inflation): rising prices erode the value of money as a medium of exchange and a store of value
2. high employment
3. economic growth: stable economic encourages long-run employment, which is itself necessary for growth
4. stable financial markets/institutions: stable and efficient financial markets are essential to a growing economy . The Fed makes funds available to commercial banks in times of Crisis, ensuring confidence in those banks
2. high employment
3. economic growth: stable economic encourages long-run employment, which is itself necessary for growth
4. stable financial markets/institutions: stable and efficient financial markets are essential to a growing economy . The Fed makes funds available to commercial banks in times of Crisis, ensuring confidence in those banks
question
In a recessionary gap the Federal Reserve want to _________
answer
accelerate
question
in an expansionary gap the Federal Reserve want to __________
answer
decelerate
question
to increase Money Supply (MS), the Fed _________
answer
buy bonds
question
to decrease Money Supply (MS), the Fed ___________
answer
sell bonds
question
An increase in the reserve deposit ratio (R)________ money supply
answer
decrease (R)
question
a decrease in the reserve deposit ratio (R)__________ money supply
answer
increase (R)
question
increasing the discount lending rate _________ money supply
answer
decrease the DLR
question
decreasing the discount lending rate ___________ money supply
answer
increase the DLR
question
Monetary policies are measured terms of __________ rather than ________________ since it is easier for the public to understand the implications of a change in __________ rather than of a change in ________________
answer
-interest rate
-changes in money supply (MS)
-interest rate
-money supply (MS)
-changes in money supply (MS)
-interest rate
-money supply (MS)
question
when the Fed _______ the MS, interest rate _________ unit it reaches a level at which households and firms are willing to hold the additional money
answer
-increases
-decreases
-decreases
question
how does interest rates affect AD demand for
1. consumption
2. investment
3. net exports
1. consumption
2. investment
3. net exports
answer
1. consumption: higher interest rate with decrease the level of consumption
-lower interest rates encourage buying on credit
-lower rates also discourages saving
2. involvement:
-lower interest rates make borrowing cheaper
3. net exports
-high u.s. interest rates attract foreign funds, rising the $ u.s. exchange rate, causing net exports to fall
-lower interest rates encourage buying on credit
-lower rates also discourages saving
2. involvement:
-lower interest rates make borrowing cheaper
3. net exports
-high u.s. interest rates attract foreign funds, rising the $ u.s. exchange rate, causing net exports to fall
question
when the federal open market committee (FOMC) decides to increase the money supply, it _____ u.s. Treasury securities. If the FOMC wishes to decrease the money supply, it _______ u,s. Treasury securities
answer
buys
sells
sells
question
The Federal Reserve cannot affect the price levelthe price level directly; therefore, the Fed typically uses the following as its policy target:
A.
Interest rates.
B.
Taxes.
C.
Inflation.
D.
Government expenditures.
A.
Interest rates.
B.
Taxes.
C.
Inflation.
D.
Government expenditures.
answer
a. interest rates
question
Which of the following is not one of the monetary policy goals of the Federal Reserve ("the Fed")?
A.
a high foreign exchange rate of the U.S. dollar relative to other currencies
B.
price stability
C.
high employment
D.
stability of financial markets
A.
a high foreign exchange rate of the U.S. dollar relative to other currencies
B.
price stability
C.
high employment
D.
stability of financial markets
answer
a. a high foreign exchange rate of the u.s. dollar revenue to other currencies
question
One of the goals of the Federal Reserve is price stability. For the Fed to achieve this goal,
A.
the rate of inflation should be low, such as 1% to 3%, and should be fairly consistent.
B.
prices should not be increasing and the inflation rate should be near zero percent.
C.
the level of unemployment should be low, less than 6%, and the inflation rate should be near zero percent.
D.
the inflation rate should be consistent but the rate of inflation can be zero, low (such as 1-3%), or high (such as 8-10%).
A.
the rate of inflation should be low, such as 1% to 3%, and should be fairly consistent.
B.
prices should not be increasing and the inflation rate should be near zero percent.
C.
the level of unemployment should be low, less than 6%, and the inflation rate should be near zero percent.
D.
the inflation rate should be consistent but the rate of inflation can be zero, low (such as 1-3%), or high (such as 8-10%).
answer
a. the rate of inflation should be low, such as 1% to 3%, and should be fairly consistent
question
Monetary policy is defined as:
A.
The actions the Federal Reserve takes to manage tax policy and interest rates.
B.
The actions Congress takes to manage the money supply and interest rates.
C.
The actions the Federal Reserve takes to manage the money supply and interest rates.
D.
The actions Congress takes to manage tax policy and interest rates.
A.
The actions the Federal Reserve takes to manage tax policy and interest rates.
B.
The actions Congress takes to manage the money supply and interest rates.
C.
The actions the Federal Reserve takes to manage the money supply and interest rates.
D.
The actions Congress takes to manage tax policy and interest rates.
answer
C.
The actions the Federal Reserve takes to manage the money supply and interest rates.
The actions the Federal Reserve takes to manage the money supply and interest rates.
question
Which of these variables are the main monetary policy targets of the Fed?
A.
the inflation rate and the unemployment rate
B.
economic growth and productivity
C.
the money supply and the interest rate
D.
real GDP and the price level
A.
the inflation rate and the unemployment rate
B.
economic growth and productivity
C.
the money supply and the interest rate
D.
real GDP and the price level
answer
c. the money supply and the interest rate
question
1. If the Fed believes the economy is about to fall into recession, it should
A.
use a contractionary monetary policy to lower the interest rate and shift AD to the left.
B.
use its judgment to do nothing and let the economy make the self adjustment back to potential GDP.
C.
use an expansionary fiscal policy to increase the interest rate and shift AD to the right.
D.
use an expansionary monetary policy to lower the interest rate and shift AD to the right.
2. If the Fed believes the inflation rate is about to increase, it should
A.
use a contractionary fiscal policy to increase the interest rate and shift AD to the left.
B.
use an expansionary monetary policy to lower the interest rate and shift AD to the right.
C.
use a combination of tax increases and spending cuts to keep the budget balanced.
D.
use a contractionary monetary policy to increase the interest rate and shift AD to the left.
A.
use a contractionary monetary policy to lower the interest rate and shift AD to the left.
B.
use its judgment to do nothing and let the economy make the self adjustment back to potential GDP.
C.
use an expansionary fiscal policy to increase the interest rate and shift AD to the right.
D.
use an expansionary monetary policy to lower the interest rate and shift AD to the right.
2. If the Fed believes the inflation rate is about to increase, it should
A.
use a contractionary fiscal policy to increase the interest rate and shift AD to the left.
B.
use an expansionary monetary policy to lower the interest rate and shift AD to the right.
C.
use a combination of tax increases and spending cuts to keep the budget balanced.
D.
use a contractionary monetary policy to increase the interest rate and shift AD to the left.
answer
1. D. use an expansionary monetary policy to lower the interest rate and shift AD to the right.
2. D. use a contractionary monetary policy to increase the interest rate and shift AD to the left.
2. D. use a contractionary monetary policy to increase the interest rate and shift AD to the left.
question
-when the fed conducts an open market purchase, the fed ___________ and the money supply _________
-when the fed conducts an open market purchase, the interest rate should _________
-when the fed conducts an open market purchase, the interest rate should _________
answer
-when the fed conducts an open market purchase, the fed BUYS SECURITIES FROM BANKS and the money supply INCREASES
-when the fed conducts an open market purchase, the interest rate should DECREASE
-when the fed conducts an open market purchase, the interest rate should DECREASE
question
When the Federal Reserve increases the discount rateincreases the discount rate as a part of a contractionary monetary policy, there is:
A.
An increase in the money supply and a decrease in the interest rate.
B.
A decrease in the money supply and an increase in the interest rate.
C.
An increase in the money supply and an increase in the interest rate.
D.
A decrease in the money supply and a decrease in the interest rate.
A.
An increase in the money supply and a decrease in the interest rate.
B.
A decrease in the money supply and an increase in the interest rate.
C.
An increase in the money supply and an increase in the interest rate.
D.
A decrease in the money supply and a decrease in the interest rate.
answer
B.
A decrease in the money supply and an increase in the interest rate.
A decrease in the money supply and an increase in the interest rate.
question
With an expansionary monetary policy, investment, consumption, and net exports all ________, which results in the aggregate demand curve shifting to the ________, increasing real GDP and the price level.
A.
decrease; right
B.
decrease; left
C.
increase; left
D.
increase; right
A.
decrease; right
B.
decrease; left
C.
increase; left
D.
increase; right
answer
D.
increase; right
increase; right
question
1. If real GDP increases,
A.there is a movement down along a stationary money demand curve.
B.there is a movement up along a stationary money demand curve.
C.the money demand curve shifts to the right.
.D.the money demand curve shifts to the left.
2. If the price level decreases,
A.the money demand curve shifts to the right.
B.there is a movement down along a stationary money demand curve.
C.there is a movement up along a stationary money demand curve.
D.the money demand curve shifts to the left.
A.there is a movement down along a stationary money demand curve.
B.there is a movement up along a stationary money demand curve.
C.the money demand curve shifts to the right.
.D.the money demand curve shifts to the left.
2. If the price level decreases,
A.the money demand curve shifts to the right.
B.there is a movement down along a stationary money demand curve.
C.there is a movement up along a stationary money demand curve.
D.the money demand curve shifts to the left.
answer
1.C.the money demand curve shifts to the right.
2.D.the money demand curve shifts to the left.
2.D.the money demand curve shifts to the left.
question
fiscal policy
answer
changes in federal taxes, government purchases, and transfer payments intended to achieve macroeconomic policy objectives (low unemployment, low & stable inflation)
question
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answer
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