Exam 3 Econ - Assignment Essays

question

Policies taken to move the economy closer to potential output:

answer

Are called stabilization policies

question

What are the two tools of fiscal policy that governments can use to stabilize an economy?:

answer

Government spending and taxation

question

Contractionary policies are policies designed to:

answer

Reduce the level of real GDP

question

Expansionary policies are policies designed to:

answer

Increase the level of real GDP

question

In order to ________, a government must increase spending and decrease taxation:

answer

Increase aggregate demand

question

A decrease in the personal income tax rate ____________ disposable income which ___________ consumption.

answer

Increases; Decreases

question

Tax cuts aimed at businesses can stimulate:

answer

Investment Spending

question

When the government develops policies to stabilize the economy:

answer

It needs to consider the multiplier effect for all fiscal policies

question

What is the reason that stabilization policies to take effect:

answer

There is a time lag for policies to take effect

question

The fact that it takes time for government to identify and recognize a problem is one reason for the occurrence of:

answer

Inside lags

question

Even when the Obama administration succeeds with its effort to gain Congressional approval for its stimulus proposals, it will still take time for these policies to actually work. The time it takes for these policies to work is known as:

answer

Outside lags

question

Which component of federal spending is included in GDP?

answer

Transfer payments

question

Why are transfer payments not included in GDP?

answer

They do not represent payments to those who contributed resources to currently produced goods or services.

question

Spending on programs that Congress authorizes __________ is known as discretionary spending:

answer

On an annual basis

question

Spending on programs that ________, such as Social Security and Medicare, is classified as entitlement and mandatory spending.

answer

Has been authorized by prior law

question

What is the largest component of the federal budget?

answer

Entitlements and mandatory spending

question

One school of thought that emphasizes the role that taxes play in an economy's supply of output is known as:

answer

Supply-side economics

question

Automatic Stabilizers

answer

Work without the need for decisions for decisions form congress of the White House

question

When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called:

answer

Crowding out

question

Suppose an economy has a balanced federal budget, and a large increase in oil prices plunges the economy into a recession. Tax revenues will _________ and expenditures on transfer payments will ___________; resulting in a budget ____________.

answer

Fall; Increase; Deficit

question

Money is:

answer

Anything that is regularly used and generally accepted in economic transactions of exchanges.

question

Money solves the dilemma of a doubt coincidence of wants by serving as a:

answer

Medium of exchange

question

Money the has a no intrinsic value and is created by a government degree is called:

answer

fiat money

question

What gives money value under a fiat system?

answer

The supply of fiat money is controlled by the government

question

In order for a barter transaction to be successful, there must be a:

answer

Double coincidence of wants

question

The supply of money in the U.S. economy is determined primarily by:

answer

The actions of the Federal Reserve and the U.S. Treasury

question

In the __________ increases in the supply of money will ___________.

answer

Short run; decrease total demand and output

question

When money is accepted as payment for a good or service.

answer

medium of exchange

question

When money is used to express the value of goods and services, it is functioning as a:

answer

Unit of account

question

Which of the following are examples of "mediums of exchange"?

answer

All of the above

question

As inflation rates increase, money becomes less useful as a:

answer

Store of value

question

Suppose after the semester ends, you take a trip to a tropical island. Upon arriving at the island, you make a stop at one of the markets and notice that everyone is carrying around jars full of little turtles. You also notice the person in line in front of you just paid for a bottle of rum with 6 turtles. Someone else just bought a straw hat for 2 turtles. Thinking back to your economics class (as painful as that might be). you would conclude that:

answer

Those little turtles are serving as money

question

According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper currency is circulation is counterfeit. Undetected counterfeit currency which is spent and circulated in the marketplace is an example of the counterfeit currency being used as a:

answer

Medium of exchange

question

answer

Is the narrowest definition of the money supply

question

Checking account balances are included in:

answer

both M1 and M2

question

Currency is included in:

answer

Both M1 and M2

question

Traveler's check are included in:

answer

Both M1 and M2

question

Which of the following is NOT included in M1

answer

savings account

question

largest component of M2

answer

Savings Deposits

question

Money market mutual funds are included in:

answer

question

Which of the following is NOT included in M1 or M2?

answer

Credit card balances

question

Economists use different definitions of money because:

answer

It is not always clear which assets are used primarily as money

question

A reason that economists keep an eye on both M2 an M1 is because:

answer

Money market accounts are sometimes use like checking accounts and sometimes like savings accounts

question

Before they can be used in regular exchanges, the assets that make up M2 must often:

answer

Be converted to M1 assets

question

A bank's reserves:

answer

All of the above

question

By law, banks are required to:

answer

Hold a fraction of demand deposits as reserves

question

What is the reserve ration?

answer

20%

question

Logan finds $10 in his jacket pocket and deposits it into a bank. As a result of this single transaction, M1 has:

answer

Not changed

question

If the banking system has a required reserve ratio of 40%, the money multiplier is:

answer

2.5

question

The money multiplier tends to be greater when:

answer

Individuals hold less cash

question

The group responsible for deciding on monetary policy is the:

answer

Federal Open Market Committee

question

Studies by economist have tended to show that countries with more independent central banks have:

answer

Less Inflation

question

Generally, when the Federal Reserve lowers interest rates, investment spending ________ and GDP_________:

answer

Increases; increases

question

The transaction demand for money comes mostly from the fact that:

answer

Money is a medium of exchange

question

At higher interest rates the:

answer

Quantity of money demanded is lower.

question

An increase in the price level in the economy leads to:

answer

A rightward shift in the demand for money curve.

question

The demand for money that arises so that individuals or firms can make purchases on quick notice is called the:

answer

Liquidity demand for money.

question

What is the motivation for individuals to hold money?

answer

All of the above

question

Increased investment spending in the economy would be a possible result of:

answer

An open market purchases of bonds by the Fed.

question

From time to time, the Federal Reserve buys back government bonds form the private sector through a process called:

answer

Open market purchases

question

How can the Federal Reserve actually increase the money supply:

answer

By purchasing more government bonds in the open market

question

What would be a way for the Federal Reserve to stimulate a sluggish economy?

answer

Buy government bonds on the open market

question

To increase the money supply using the reserve requirements, what would the Fed typically do?

answer

Reduce the reserve requirements for banks

question

By raising the discount rate, the Federal Reserve __________ banks from borrowing more reserves:

answer

Discourages

question

A decrease in the discount rate:

answer

Reduces the cost of borrowing form the Fed.

question

An open market __________ by the Fed increases the money supply, which leads to ___________ interest rates and increased GDP:

answer

Purchases; decreased

question

An open market purchase by the Fed:

answer

Increases investment and increases output.

question

The exchange rate is:

answer

The price at which one currency trades for another currency

question

A rise in the value of a currency is called a(n)

answer

Appreciation

question

a decrease in the value of a currency is called:

answer

Depreciation

question

Lower U.S. interest rates cause the value of the dollar to:

answer

Fall, making U.S. goods relatively cheaper on world markets

question

An open market sale by the fed cause the value of the dollar to:

answer

Rise, reducing net exports

1 of 72

question

Policies taken to move the economy closer to potential output:

answer

Are called stabilization policies

question

What are the two tools of fiscal policy that governments can use to stabilize an economy?:

answer

Government spending and taxation

question

Contractionary policies are policies designed to:

answer

Reduce the level of real GDP

question

Expansionary policies are policies designed to:

answer

Increase the level of real GDP

question

In order to ________, a government must increase spending and decrease taxation:

answer

Increase aggregate demand

question

A decrease in the personal income tax rate ____________ disposable income which ___________ consumption.

answer

Increases; Decreases

question

Tax cuts aimed at businesses can stimulate:

answer

Investment Spending

question

When the government develops policies to stabilize the economy:

answer

It needs to consider the multiplier effect for all fiscal policies

question

What is the reason that stabilization policies to take effect:

answer

There is a time lag for policies to take effect

question

The fact that it takes time for government to identify and recognize a problem is one reason for the occurrence of:

answer

Inside lags

question

answer

Outside lags

question

Which component of federal spending is included in GDP?

answer

Transfer payments

question

Why are transfer payments not included in GDP?

answer

They do not represent payments to those who contributed resources to currently produced goods or services.

question

Spending on programs that Congress authorizes __________ is known as discretionary spending:

answer

On an annual basis

question

Spending on programs that ________, such as Social Security and Medicare, is classified as entitlement and mandatory spending.

answer

Has been authorized by prior law

question

What is the largest component of the federal budget?

answer

Entitlements and mandatory spending

question

One school of thought that emphasizes the role that taxes play in an economy's supply of output is known as:

answer

Supply-side economics

question

Automatic Stabilizers

answer

Work without the need for decisions for decisions form congress of the White House

question

When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called:

answer

Crowding out

question

answer

Fall; Increase; Deficit

question

Money is:

answer

Anything that is regularly used and generally accepted in economic transactions of exchanges.

question

Money solves the dilemma of a doubt coincidence of wants by serving as a:

answer

Medium of exchange

question

Money the has a no intrinsic value and is created by a government degree is called:

answer

fiat money

question

What gives money value under a fiat system?

answer

The supply of fiat money is controlled by the government

question

In order for a barter transaction to be successful, there must be a:

answer

Double coincidence of wants

question

The supply of money in the U.S. economy is determined primarily by:

answer

The actions of the Federal Reserve and the U.S. Treasury

question

In the __________ increases in the supply of money will ___________.

answer

Short run; decrease total demand and output

question

When money is accepted as payment for a good or service.

answer

medium of exchange

question

When money is used to express the value of goods and services, it is functioning as a:

answer

Unit of account

question

Which of the following are examples of "mediums of exchange"?

answer

All of the above

question

As inflation rates increase, money becomes less useful as a:

answer

Store of value

question

answer

Those little turtles are serving as money

question

answer

Medium of exchange

question

answer

Is the narrowest definition of the money supply

question

Checking account balances are included in:

answer

both M1 and M2

question

Currency is included in:

answer

Both M1 and M2

question

Traveler's check are included in:

answer

Both M1 and M2

question

Which of the following is NOT included in M1

answer

savings account

question

largest component of M2

answer

Savings Deposits

question

Money market mutual funds are included in:

answer

question

Which of the following is NOT included in M1 or M2?

answer

Credit card balances

question

Economists use different definitions of money because:

answer

It is not always clear which assets are used primarily as money

question

A reason that economists keep an eye on both M2 an M1 is because:

answer

Money market accounts are sometimes use like checking accounts and sometimes like savings accounts

question

Before they can be used in regular exchanges, the assets that make up M2 must often:

answer

Be converted to M1 assets

question

A bank's reserves:

answer

All of the above

question

By law, banks are required to:

answer

Hold a fraction of demand deposits as reserves

question

What is the reserve ration?

answer

20%

question

Logan finds $10 in his jacket pocket and deposits it into a bank. As a result of this single transaction, M1 has:

answer

Not changed

question

If the banking system has a required reserve ratio of 40%, the money multiplier is:

answer

2.5

question

The money multiplier tends to be greater when:

answer

Individuals hold less cash

question

The group responsible for deciding on monetary policy is the:

answer

Federal Open Market Committee

question

Studies by economist have tended to show that countries with more independent central banks have:

answer

Less Inflation

question

Generally, when the Federal Reserve lowers interest rates, investment spending ________ and GDP_________:

answer

Increases; increases

question

The transaction demand for money comes mostly from the fact that:

answer

Money is a medium of exchange

question

At higher interest rates the:

answer

Quantity of money demanded is lower.

question

An increase in the price level in the economy leads to:

answer

A rightward shift in the demand for money curve.

question

The demand for money that arises so that individuals or firms can make purchases on quick notice is called the:

answer

Liquidity demand for money.

question

What is the motivation for individuals to hold money?

answer

All of the above

question

Increased investment spending in the economy would be a possible result of:

answer

An open market purchases of bonds by the Fed.

question

From time to time, the Federal Reserve buys back government bonds form the private sector through a process called:

answer

Open market purchases

question

How can the Federal Reserve actually increase the money supply:

answer

By purchasing more government bonds in the open market

question

What would be a way for the Federal Reserve to stimulate a sluggish economy?

answer

Buy government bonds on the open market

question

To increase the money supply using the reserve requirements, what would the Fed typically do?

answer

Reduce the reserve requirements for banks

question

By raising the discount rate, the Federal Reserve __________ banks from borrowing more reserves:

answer

Discourages

question

A decrease in the discount rate:

answer

Reduces the cost of borrowing form the Fed.

question

An open market __________ by the Fed increases the money supply, which leads to ___________ interest rates and increased GDP:

answer

Purchases; decreased

question

An open market purchase by the Fed:

answer

Increases investment and increases output.

question

The exchange rate is:

answer

The price at which one currency trades for another currency

question

A rise in the value of a currency is called a(n)

answer

Appreciation

question

a decrease in the value of a currency is called:

answer

Depreciation

question

Lower U.S. interest rates cause the value of the dollar to:

answer

Fall, making U.S. goods relatively cheaper on world markets

question

An open market sale by the fed cause the value of the dollar to:

answer

Rise, reducing net exports

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