question
in developing his theory of unemployment during the great depression, Keynes
answer
explained how aggregate demand could be inadequate to ensure full employment
question
which type of expenditure is typically the largest component of aggregate demand
answer
consumption
question
what is possible at the intersection of aggregate supply and aggregate demand?
answer
inflation, full employment, or unemployment
question
when aggregate demand exceeds the full employment level of output, the result is:
answer
a higher average price level
question
Keynes argues that the level of economic activity is primarily related to:
answer
Aggregate demand
question
if an economy has a GDP gap. such that equilibrium output is less than full-employment output, what fiscal policies will reduce the gap?
answer
an increase in government expenditures on highways and bridges
question
what explains why the multiplier effect exists
answer
the circular nature of the economy
the fact that money is spent and respent multiple times
one person's spending becomes another person's income
the fact that money is spent and respent multiple times
one person's spending becomes another person's income
question
what could be a Keynesian soultion for inflation
answer
decrease government expenditures and letthe multiplier work.
question
if consumers spend 90 cents out of every extra dollar of disposable income then:
answer
the MPS is .10
the MPC is .90
the multiplier is 10
the MPC is .90
the multiplier is 10
question
if government spending increases by $50 billion and the MPC is .75, what would the total change in spending be for the economy, ceteris paribus?
answer
$200 billion
question
which of the following economies has the largest multiplier
1) MPS of .1
2) MPS of .25
3) MPC .8
4) MPC .6`
1) MPS of .1
2) MPS of .25
3) MPC .8
4) MPC .6`
answer
MPS of .1
question
what provides fiscal stimulus to the economy
answer
increased government purchases
question
the amount of additional aggregate demand generated by increased government spending depends on:
answer
the marginal propensity to consume
the number of spending cycles that occur in a given time period
the size of the initial increase in government spending
the number of spending cycles that occur in a given time period
the size of the initial increase in government spending
question
during an inflationary period it is appropriate for the government to persue policies that:
answer
reduce aggregate demand
question
what will definitely reduce a budget deficit and provide fiscal restraint?
answer
lower government spending and lower taxes
question
when we compare the total impact on aggregate demand of a $75 billion increase in government expenditures and a $75 billion decrease in taxes we find that the:
answer
increase in government expenditures will have a greater total impact on aggregate demand
question
suppose fgovernment spending decreases by $10 billion, and the MPC is .6. what is the total impact on aggregate demand as a result of this action, ceteris paribus?
answer
a decrease of $25 billion
question
fiscal policy is most effective in changing the level of real output without causing inflation when the aggregate demand supply curve is
answer
horizontal
question
during a recession the appropriate fiscal policy would be for the federal government to:
answer
run a budget deficit
question
alex watches her freind's children and the friend walks alex's dogs instead of paying her. this is an example of:
answer
Barter
question
what is a necessary characteristic of money?
answer
it must serve as a medium of exchange
question
almost all of the U.s. money supply (M1) is in the form of:
answer
currency in circulation and transaction- account balances
question
if tameika takes $400 out of her savings account and hides it in her cookie jar in the form of cahs, M1 will:
answer
increase by $400
question
money creation occurs when:
answer
banks make loans to borrowers
question
the main goal of bank maangers is to:
answer
earn a profit
question
the legal minimum-reserve ratio is set by:
answer
the federal reserve
question
what is the correct way to calculate excess reserves?
answer
total reserves minus required reserves
question
a bank may lend an amount equal to its:
answer
excess reserves
question
suppose the total amount of transactions-account balances for all the banks in the banking system is $1 million and that the minimum reserve ratio is .08. the amount of required reserves for the banking system is equal to :
answer
$80,000
question
the term fractional reserves refers to:
answer
reserves that are a fraction of total deposits
question
if the minimum reserve ratio is 20 percent, the money multiplier is:
answer
5.00
question
banks are required to keep a minimum amount of funds in the reseve because:
answer
depositors may decide to withdraw funds.
it provides constraint on the bank's ability to create money
it provides constraint on the bank's ability to affect aggregate demand
it provides constraint on the bank's ability to create money
it provides constraint on the bank's ability to affect aggregate demand
question
if there were no minimum reserve requirement in the banking system, the potential ability of banks to create money would be:
answer
unlimited
question
suppose a bank has $20 million in deposits, a required reserve ratio of 15 percent, and total reserves of 4 million. this bank has excess reserves of:
answer
$1 million
question
suppose jordan finds $100 in the pocket of his jacket and deposits themoney into his checking account. the bank must hold 7 percent of this deposit as required reserves. what is the approximate potential increase in the money supply because of this deposit
answer
$1,329
question
suppose the entire banking system has a required reserve ratio of 10 percent. how much can the money supply increase in response to a $5 billion increase in excess reserves for the whole banking system?
answer
$ 50 billion
question
what is a constraint on deposit creation?
answer
the willingness of consumers and firms to accept checks in payment of goods and services
the willing ness of consumers, businesses, and governments to borrow
the willingness of banks to loan money to qualified borrowers
the willing ness of consumers, businesses, and governments to borrow
the willingness of banks to loan money to qualified borrowers
question
banks perform the essential function of:
answer
transferring funds from savers to spenders
question
an increase in the amount of bank loans should shift the aggregate:
answer
demand curve to the right
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