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ECO/372T: Principles of Macroeconomics

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ECO/372T Week 1 Everything listed for Week 1 is included in purchase!! *ECO/372T Week 1 Tutorials Kit includes:* 1. Discussion Question: Nominal GDP 2. Apply: Measuring Output and Income Quiz 3. Practice: Measuring Output and Income Quiz Discussion - Nominal GDP Includes 2 Answers to Discussion Question GDP is a strong measure of the health of the economy, and it’s among the most important and widely reported economic data. In your own words, summarize nominal GDP. Locate an online news article that discusses impacts to GDP in some way. Summarize the article and explain its relation to/impact on GDP. Cite your sources. Apply: Measuring Output and Income Quiz Includes Questions and Answers, plus additional questions/answers - A+ Work! Suppose a small economy produces only smart TVs. In year one, 100,00 TVs are produced and sold at a price of $1,200 each. In year two, 75,00 TVS are produced and sold at a price of $1,200. As a result, What do economists mean when they refer to inflation as “general increase in the prices of goods and services.” Which of the following scenarios would be considered an investment according to economists? Real GDP refers to Nominal GDP is the market value of Suppose that real GDP per capita in the United States is $49,000. If the long-term growth rate of real GDP per capita is 1.6% per year, how many years will it take for real GDP per capita to reach $98,000? Which of the following is an example of an intermediate good? One could argue that GDP is not a good measure of the standard of living in a nation because it _____. The service a homeowner performs when she mows her yard is not included in GDP because _____. The nominal GDP in Liplandis is currently $3,456 billion. If net foreign factor income increases by $400 billion, the nominal GDP will _____. What can we conclude if depreciation (consumption of fixed capital) exceeds gross domestic investment? Which of the following measures is most often used to compare the standards of living in different countries? Which of the following answer choices best describes a consumption expenditure category in the national income accounting? The expenditures or output approach to GDP measures it by summing up _____. The following is national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320), imports ($35), exports ($22), personal consumption expenditures ($2,460), and government purchases ($470). What is GDP in this economy? A nation's gross domestic product (GDP) _____. When gross investment is positive, net investment _____. Which of the following underground economy activities would be considered a black market? The consumption of fixed capital in each year's production is called _____. GDP does not include which of the following activities? Which of the following is an example of net exports? If gross investment for a year was $120 billion and net investment was $65 billion, then in that year the country's capital stock _____. Nominal GDP is the market value of _____. To avoid multiple counting in national income accounts, _____. What are net exports? When are net exports negative? Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2, except that business inventories increased by $10 billion. GDP in year 2 is _____. All else equal, increases in proprietors' income will _____. The GDP price index measures changes in the _____. Which of the following is not included in the sum of national income? Currently, the largest component of aggregate spending in the United States is _____. GDP understates the amount of economic production in the United States because it excludes _____. Which one of the following is not an example of final goods in national income accounting? If output increases by 8% from year 5 to year 6, then in that period _____. When local police and fire departments buy new cars for their operations, these are counted as part of _____. Which of the following is not an example of an intermediate good? Consumption of fixed capital (depreciation) can be determined by _____. Gross domestic product in this economy is _____. Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $900. Donita sells the dresses for $1,500 to kids attending the prom. The total contribution to GDP of this series of transactions is Refer to the accompanying data (all figures in billions of dollars). GDP is Suppose a family's income increases by 3 percent at the same time that inflation is 5 percent. Then the Refer to the graphs. Which of the following best represents a negative demand shock when prices are inflexible? If in some year gross investment was $240 billion and net investment was $130 billion, then in that year the country's capital stock If real GDP in a year was $3,900 billion and the price index was 130, then nominal GDP in that year was approximately Suppose that GDP was $300 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $15 billion. GDP in year 2 is Practice Homework: Measuring Output and Income Includes Questions and Answers - A+ Work! Before the Industrial Revolution, living standards in the world The "rule of 72" is a formula for determining the approximate number of If an economy maintains a small rate of growth for a long period of time, then the size of the economy What is the largest expenditure component of GDP? Government purchases include spending on The consumption of fixed capital in each year’s production is called What are net exports? The expenditures or output approach to GDP measures it by summing up GDP measured using current prices is called GDP measured using base year prices is called The growth of GDP may understate changes in the economy's economic well-being over time if the Money spent on the purchase of a newly constructed house is included in GDP as a part of Nominal GDP differs from real GDP because If real GDP declines in a given year, nominal GDP Refer to the table. Between years 1 and 2, real GDP grew by __________ percent in Alta


ECO/372T Week 2 Everything listed for Week 2 is included in purchase!! *ECO/372T Week 2 Tutorials Kit includes:* 1. Discussion Question: Business Cycles 2. Apply: Business Cycles, Unemployment, and Inflation Quiz 3. Practice: Business Cycles, Unemployment, and Inflation Quiz Discussion - Business Cycles The business cycle represents the short-term changes experienced in the economy due to changes in levels of economic activity. Summarize the 4 different phases of the business cycle. Offer real-life events that you’ve experienced or researched, as examples for 1 to 2 phases of your choice. Share the impact that you, your company, or others around you experienced. Based on that impact, what corrective action(s) should be taken? Apply: Summative Assessment: Business Cycles, Unemployment, and Inflation Quiz Includes Questions and Answers, plus BONUS questions/answers - A+ Work! The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates? What do economists mean when they refer to inflation as “general increase in the prices of goods and services” The annual inflation rate measures the percentage growth rate of If the Consumer Price Index was 125 in one year and 120 in the following year, then the rate of inflation is approximately The best example of a "frictionally unemployed" worker is one who Which of the following statistics can turn negative? The rate of unemployment when the economy is fully employed is called the According to the Bureau of Labor Statistics, to be officially unemployed a person must Using this information, which of the following statements is correct regarding these two short recessions? Historical data show that during the recession of 1990-1991, the natural rate of unemployment was about 5.9% while the actual unemployment rate was 7.0%. A decade later, during the 2001 recession, the natural rate of unemployment fell to 4.8% while actual unemployment was 6.0%. Using this information, which of the following statements is correct regarding these two short recessions The following information is given for an economy. Labor Force of an Economy Table. How much of the population is older than 16? What is the size of the labor force? What is the labor force participation rate? Using the graph below, identify the different stages of the business cycle. Assume A, B, and C represent consecutive years. Inflation is a general increase in the prices of all goods and services. When inflation occurs people When inflation occurs If the CPI declines from one year to the next, then which one of the following statements is not true? Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to fulltime work. As a result Official unemployment rate statistics may Unexpected inflation arbitrarily: Which of the following groups has traditionally benefited from unexpected inflation? Inflation that occurs when total spending is greater than the economy’s ability to produce output at the existing price level is: Which of the following measures the changes in the prices of a “market basket” of some 300 goods and services purchased by typical urban consumers? The inflation rate measures the percentage growth rate of: What is an advantage of mild inflation according to some economists? The CPI compiled by the Bureau of Labor Statistics is used in the computations for the: Core inflation refers to the inflation picture after stripping away the: What is the main problem with mild inflation according to some economists? Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unexpected inflation occurs in the economy, then: Inflation is a rise in: In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion, in year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the Consumer Price Index for the economy in year 2? Inflation caused by an increase in aggregate spending is referred to as: Inflation caused by a rise in the prices of inputs is referred to as Use the table below to answer the next question. Determine the number of people frictionally unemployed for the year 2006. The natural rate of unemployment: In calculating the unemployment rate, part-time workers are: A recession is a decline in Use the following diagram to answer the next question. The straight line E drawn through the wavy lines would provide an estimate of the The labor force includes: In the United States, business cycles have occurred against a backdrop of a long-run trend of: In calculating the unemployment rate, ‘discouraged’ workers who are not actively seeking employment are Unemployment that occurs when there is deficient demand for the goods and services of an economy is called A mismatch between the geographic location of workers and the location of job openings would results in which type of unemployment? Search and wait unemployment is another way to describe: The unemployed are those people who: The unemployment rate is interpreted as the percentage of the The recurrent ups and downs in the level of economic activity extending over several years are referred to as: In the expansion phase of a business cycle: Which of the following groups declares the start and end of recessions in the U.S.? The rate of unemployment when the economy is fully employed is called the Which of the following is the correct way to calculate the unemployment rate? Practice Homework: Business Cycles, Unemployment, and Inflation Quiz Includes Questions and Answers, ALL Practice Quizzes Combined - A+ Work! The recurrent ups and downs in the level of economic activity extending over several years are referred to as The unemployment rate is interpreted as the percentage of the The labor force includes Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is The natural rate of unemployment New college graduates still looking for their first jobs would be classified in the BLS data as Inflation is a rise in Which phase of the business cycle would be most closely associated with an economic contraction? Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers? A recession is a decline in The goods and services used to calculate the consumer price index represent Ahmed bought the same goods and services this year as last year. But, he has experienced inflation. This means Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would Which of the following statistics can turn negative? The recurrent ups and downs in the level of economic activity extending over several years are referred to as The unemployment rate is interpreted as the percentage of the labor force The labor force includes employed workers and persons who are officially Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is The natural rate of unemployment is equal to the total of New college graduates still looking for their first jobs would be classified in the BLS data as Inflation is a rise in Which phase of the business cycle would be most closely associated with an economic contraction? Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers? A recession is a decline in The goods and services used to calculate the consumer price index represent Ahmed bought the same goods and services this year as last year. But, he has experienced inflation. This means Using the graph below, identify the different stages of the business cycle. Assume that A, B, and C represent consecutive years. a. A time period when the economy is growing toward full employment is known as __________. It is depicted in the graph as, _________ . b. A time period characterized by full or near-full employment is known as ________. It is depicted in the graph as _________. c. A time period with two consecutive quarters of declining output is known as _________. It is depicted in the graph as __________. d. A time period when employment and real output are at their lowest levels is known as ___________. It is depicted in the graph as _______. In each of the following examples, identify whether the individual is experiencing cyclical unemployment, frictional unemployment, structural unemployment, or no unemployment. a. Eduardo has recently moved to a new city with his wife who was offered a great job there. He is trying to find a position in the same industry he worked in before relocating. b. Derek worked for a large telecommunications firm that went bankrupt last year due to a recent recession. He has since tried to find work with one of the firm's competitors, but good jobs are currently hard to come by. c. Drew lost his job at a car manufacturer last year. He spent 6 months applying for every job possible before giving up 2 months ago. He now spends his day playing Xbox. d. Paula has 20 years of experience in manufacturing. Her employer, and many other manufacturing firms, recently closed their U.S. plants. She would like to find a similar job but is unable to find anything that utilizes her skills. e. Katherine works part-time at a small retail store. She would like to work full-time, but her employer is currently unable to extend her hours. f. Tyrell just graduated from college with a business degree. He is currently looking for a job in banking in the major city he just moved to. g. Mike is a contractor who has been unable to find work, since most businesses are delaying or canceling their construction plans due to economic uncertainty in the coming year. h. Meg used to own and run her own bookstore. Her sales declined due to competition from online retailers. She has not been able to find any work related to her skills in the diminishing retail industry for books.


ECO/372T Week 3 Everything listed for Week 3 is included in purchase!! *ECO/372T Week 3 Tutorials Kit includes:* 1. Discussion Question: Aggregate Demand 2. Apply: Public Finance and Aggregate Demand and Supply Quiz 3. Practice: Aggregate Demand and Aggregate Supply Quiz Discussion - Aggregate Demand The aggregate demand and the aggregate supply model allows us to examine how a variety of events can affect the economy. In your own words, discuss which of the four sources identified with aggregate demand has caused a change in the aggregate demand for a product or service you or your employer use. Share the effect that source has had on how you or your employer contribute to the measurement of aggregate demand. Apply: Summative Assessment: Public Finance & Aggregate Demand & Supply Quiz Includes Questions and Answers, plus additional questions/answers - A+ Work! The aggregate demand curve or schedule shows the relationship between the total demand for output and the Which combination of factors would most likely increase aggregate demand? Changes in the national incomes of our trading partners would directly affect our The short-run aggregate supply curve shows the Which line represents the long-run aggregate supply curve? Use the following graph to answer the next question. If aggregate demand curve shifts from AD2 to AD1, the effect on real GDP will be a decrease from If aggregate demand increases and aggregate supply decreases, the price level Use the following diagrams for the U.S. economy to answer the next question. Which of the diagrams best portrays the effects of a substantial reduction in government spending? Use the following diagrams for the U.S. economy to answer the next question. Assuming the economy is initially at full employment, which of the diagrams best portrays a recession? Most economists believe that property taxes are regressive. How is the public debt calculated? A decrease in expected returns on investment will most likely shift the AD curve to the _____. The aggregate demand curve or schedule shows the relationship between the total demand for output and the _____. An aggregate supply curve represents the relationship between the _____. In which of the following sets of circumstances can we confidently expect inflation? The table below shows labor income for four individuals and the amount each has paid in income taxes. Labor Income, Tax Paid, and Average Tax Rate Is the income tax depicted here progressive, regressive, or proportional?A decrease in government spending will cause a(n) _____. Which one of the following is not an excise tax of the federal government? One important reason why the United States government is not likely to go bankrupt even with a large public debt is that it has The circular flow model with government included would show that government Which of the following statements about payroll taxes is false? The table below presents the tax revenue and spending for the government over five years. Which one of the following is not a major source of funds for the U.S. federal government? Which of the following is nota significant source of revenue for the U.S. federal government? A budget surplus means that Which of the following descriptions is most representative of the mix of revenues and expenditures of the federal government? Which of the following descriptions is most representative of the mix of revenues and expenditures of a local government? Which of the following is not a government activity that is involved in public finance? The table below presents the tax revenue and spending for the government over five years. Government Revenue and Spending a. Under the "Budget Amount" column calculate the annual budget outcome. b. Under the "Budget" column determine whether the annual budget outcome is a budget surplus, budget deficit, or a balanced budget. c. Suppose the government has no debt entering into year 1. At the end of year 5, what is the government's level of debt? Use the following table which shows the aggregate demand and aggregate supply schedules for a hypothetical economy to answer the next question. The equilibrium price and output levels will be _____. The foreign purchases, interest rate, and real-balances effects explain why the ____________. Use the following graph to answer the next question. If AD1 shifts to AD2, then the equilibrium output increases from _____. The long-run aggregate supply curve is _____. Use the following graph to answer the next question. When output increases from Q1 and the price level decreases from P1, this change will _____. An aggregate supply curve represents the relationship between the _____. Use the following graph to answer the next question. If AD1 shifts to AD2, then the equilibrium output increases from _____. The long-run aggregate supply curve is _____. Practice Homework: Aggregate Demand and Aggregate Supply Quiz Includes Answers, ALL Practice Quizzes Combined - includes more questions included than are shown here A+ Work! Sources of revenue are the same for federal, state, and local governments. Which of the following is not an area of most federal spending? Interest on the national debt is a major expenditure for the federal government which indicates that the federal government: At the state government level, the main sources of income are: The main source of income for ___________ governments is property taxes. To provide goods and services, the government needs a source of ________ At the federal government level, which of the following are the main sources of income? More often than not, the federal government spends ______than it receives in revenue forcing it to borrow to finance its deficits State governments spend money on all of the following except: The main source of income for local governments is ___________ taxes. The main source of income for __________ governments is property taxes. Sales taxes are_________, in that the tax rate falls as the amount taxed rises. An average tax rate equals the amount of tax paid______, by income and multiplied by 100 The average tax rate: Most local governments also receive financial support from the _______ and ______levels. Most local governments receive financial support from the federal and state levels. (True or False) A(n)_________, tax rate equals the amount of tax paid divided by income and multiplied by 100. (Use one word for the blank.) Federal income taxes are ____________ (progressive/proportional/regressive). The type of tax that is assessed is determined: Daniel has an annual taxable income of $25,000 and pays $2,500 in income taxes. Julia has a taxable income of $45,000 and pays $5,000 in income taxes. This tax is: Sales taxes are _________ in that the tax rate falls as the amount taxed rises. A budget ______occurs when a government receives more revenue than it spends in any given fiscal year. Revenue sources are different for federal, state, and local governments. (True or False) Suppose that tax revenue is $300 billion and that government spending is $350 billion. The budget is: The type of tax (progressive, regressive, or proportional) is determined by using the ________ tax rate. A progressive tax is one in which the average tax rate _________ (one word) as income increases. A(n) ____________tax is one in which the average tax rate stays the same as income increases. A regressive tax is one in which the average tax rate _________ as income increases. A budget deficit occurs when a government receives ____ revenue than it spends in any given fiscal year. The type of tax that is assessed is determined: Medicare taxes are an example of a: When the government needs to borrow money, it _______ the demand for loanable funds in the economy. The government budget may be in ______, in _______, or in _________. Suppose that tax revenue is $300 billion and that government spending is $250 billion. The budget is: Most economists prefer measuring the deficit relative to GDP because: The national _____ is the accumulation of deficits and surpluses over time. Budget deficits are calculated and reported on a(n) _____basis. The federal government finances its deficits via ______ A budget is balanced when the government’s revenue ______ what the government spends in any given fiscal year. Most economists prefer measuring the deficit relative to _______ because it places the deficit in better context and allows a comparison across time or across governments from different countries. The national debt is the accumulation of _______ and ________ over time. Suppose that the government runs a budget deficit of $75 billion in year 1. Assume that the year began with a national debt of $25 billion. In year 2 the government ran a budget surplus of $50 billion. In year 3, the government spent $100 billion more than it collected in taxes. The debt is $ _______billion. A budget deficit occurs when a government receives ___ revenue than it spends in any given fiscal year. Suppose that the government runs a budget deficit of $75 billion in year 1. Assume that the year began with a national debt of $0. In year 2 the government ran a budget surplus of $50 billion. In year 3, the government spent $200 billion more than it collected in taxes. The debt is billion. Which of the following events would most likely reduce aggregate demand? The labels for the axes of the aggregate demand graph should be A decrease in expected returns on investment will most likely shift the AD curve to the _____. Which would most likely shift the aggregate supply curve? A change in the prices of The short-run version of aggregate supply assumes that product prices are _____. The economy's long-run AS curve assumes that wages and other resource prices The long-run aggregate supply analysis assumes that _____. Which of the following effects best explains the downward slope of the aggregate demand curve? In the aggregate demand-aggregate supply model, the economy’s price level is assumed to be _____. A decrease in labor costs will cause aggregate _____.: 06_12_2018 An aggregate supply curve represents the relationship between the _____. Refer to the graph shown. An economy is in both short- and long-run equilibrium at _____. The intersection of the aggregate demand and aggregate supply curves determines the _____. If the national incomes of our trading partners increase, then our aggregate demand _____. Use the following graph to answer the next question. When output increases from Q1 and the price level decreases from P1, this change will _____. The aggregate supply curve (short run) _____. If at a particular price level, real output from producers is greater than real output desired by purchasers, then there will be a general _____. Use the following graph to answer the next question. If current output is Q1 and full-employment output is Q3, then in the long run the short aggregate supply schedule is _____. Which would most likely increase aggregate supply? Use the following graph, which shows an aggregate demand, to answer the next question.If the economy is at point C and the price level increases by 100, then the real balances, interest-rate, and foreign purchases effects will _____.


ECO/372T Week 4 Everything listed for Week 4 is included in purchase!! *ECO/372T Week 4 Tutorials Kit includes:* 1. Discussion Question: Transaction and Asset Demand 2. Apply: Money and the Federal Reserve Quiz 3. Practice: Money and the Federal Reserve Quiz Discussion - Transaction and Asset Demand Compare and contrast the transaction demand and asset demand for money. What is the relationship between interest rate, aggregate income, and price level? Provide two specific examples of transaction demand for money. Provide two specific examples of asset demand for money. Practice Homework: Money and the Federal Reserve Quiz - Part I, II, III & Practice Homework COMBINED QUIZZES Plus Brand NEW Questions & Answers Included The functions of money are to serve as a Which of the following functions of money enables society to gain the benefits of geographic and labor specialization? The M2 measure of money consists of the sum of Which of the following would be considered to be the most liquid? The main function of the Federal Reserve System is to Fractional reserve banking refers to a system where banks A consumer holds money to meet spending needs. This would be an example of the Which of the following varies directly with the interest rate? Who determines the size of the money supply in the United States? If, in the market for money, the amount of money supplied exceeds the amount of money households and businesses want to hold, the interest rate will Use the following diagram of the market for money to answer the next question. The equilibrium interest rate is An increase in the money supply is likely to reduce Use the following graph to answer the next question. The graph shows the supply and demand for money where Dm1, Dm2, and Dm3 represent different demands for money and Sm1, Sm2, and Sm3 represent different levels of the money supply. The initial equilibrium point is A. What will be the new equilibrium point following an autonomous increase in the asset demand for money? Suppose there is an increase in money demand, as a result interest rates will Holding the money deposits of businesses and households and making loans to the public are the basic functions of Use the following table to determine the levels of M1 and M2 in the United States. Calculate the M1 money supply. Calculate the M2 money supply: Money is: Explain the changes in M1 and M2 for each of the following scenarios. When Lily transfers $100 from her savings account into her checking account, M1______ and M2 _________. If Miguel deposits $200 cash into his money market mutual fund, M1 ________ and M2 _________. If Sam takes $1,000 from his savings account to purchase Microsoft stock, M1 _______ and M2 ________. The Federal Reserve District Banks are divided: Suppose the Federal Reserve increases the amount of reserves by $100 million and the total money supply increases by $500 million. The part of the Federal Reserve that determines and implements the nation’s monetary policy and controls the money supply to promote stable prices and economic growth is the Suppose that Ava withdraws $300 from her savings account at Second Bank. The reserve requirement facing Second Bank is 10%. Assume the bank does not wish to hold any The equilibrium rate of interest in the market for money is determined by the intersection of the The Federal Reserve System was established by the Federal Reserve Act of If the reserve requirement is 20% and commercial bankers decide to hold additional excess reserves equal to 5% of any newly acquired checkable deposits, then the effective monetary multiplier for the banking system will be If you put a $20 bill in the pocket of your winter coat at the beginning of spring so that you will be surprised when you find it again next winter, you are using money as The reason for the Fed being set up as an independent agency of government is to The required-reserve ratio is equal to a commercial bank’s Which definition(s) of the money supply include(s) only items that are directly and immediately usable as a medium of exchange? The M1 measure of money consists of the sum of Money functions as a store of value if it allows you to Money eliminates the need for a coincidence of wants in trading primarily through its role as a If the reserve requirement were 15% percent, the value of the monetary multiplier would be Use the following graph to answer the next question. Which line in the graph would best illustrate the supply of money curve? A checkable deposit at a commercial bank is a(n) The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for The coupon rate is the Which of the following are liabilities to a bank? Other things being equal, an expansion of commercial bank lending A bank’s required reserves can be calculated by Members of the Federal Reserve Board of Governors are Money is “created” when Assets of the commercial banking system include The Federal Reserve System consists of which of the following? An increase in nominal GDP will Assume that the required reserve ratio is 20%. A business deposits a $50,000 check at Bank A, the check is drawn against Bank B. What happens to the reserves at Bank A and Bank B? One hundred percent reserve banking refers to a situation in which banks’ reserves equal One hundred percent of their Which group is responsible for the policy decision of changing the money supply? A bank has $2 million in checkable deposits. In the bank’s balance sheet, this would be part of What function is money serving when you deposit it in a savings account? Which of the following items are included in money supply M2 but not M1? Use the following graph to answer the next question. Which line in the graph above would best illustrate the asset demand for money curve? Cash held by a bank in its vault is part of the bank’s If product prices were stated in terms of tobacco leaves, then tobacco leaves would be functioning primarily as One year before maturity the price of a bond with the principal amount of $1,000 and a coupon rate of 5% paid annually fell to $981. The one year interest rate must be Credit card balances are not considered to be money primarily because they Traditionally, the Federal Reserve can give emergency loans only to A Bank’s net worth is equal to its A wealthy executive is holding money, waiting for a good time to invest in the stock market. This action would be an example of the __________is any item that both buyers and sellers will accept in exchange for goods and services. (Enter one word in the blank.) When people specialize and produce the goods for which they have a(n) Gold, silver, and other metals have been used as Comparisons of the value of goods relative to everything else are easy when money is used as: Knowing how much money an economy has matters because it helps determine interest rates and prices. (True or False) ________as a means of exchange in our economy makes it easier for people to make transactions with each other. The Federal Reserve is commonly called the You can specialize at doing one thing whether its fixing cars, teaching economics, making cakes, or building websites in an economy that uses: ________consists of the most liquid forms of money. The first time money represented value, instead of being intrinsically valuable like a gold coin, was: A deposit account that accepts deposits and purchases bonds and commercial debt that pay interest is a: When used as an asset that is commonly used to facilitate trade between buyers and sellers, money is: ____in active circulation includes money in everyone's pockets and is part of____ You can write a check to pay for goods and services. The check itself is: Which entity controls the money supply? Which of the following is considered money? M1 consists of the most____ forms of money Which of the following is a primary role of the Federal Reserve? _____deposit is an interest-bearing deposit held by a bank or financial institution for a fixed term, whereby the depositor can only withdraw the funds after giving notice. Monetary policy affects____ rates charged on loans and paid on savings. _______is the measure of money supply that contains currency or assets that can almost immediately be transferred into currency without penalty. The fraction of checkable deposits that banks must keep on hand as reserves either as currency or on deposit with the Federal Reserve is called the: When a check_______and money is transferred out of a checking account, it is the transfer of funds that constitutes the actual payment for the good and service. The primary entity charged with supervision and regulation of member banks to prevent banking panics or disruptions is called the Deposits that automatically transfer money balances from savings accounts to checking accounts are part of which definition of the money supply? Directing monetary policy and supervising member banks is done by: The entity that is responsible for overseeing research into domestic and international financial conditions and investigating the health of the U.S. economy, the effect of banking laws, and other issues that consumers and businesses face is the: policy refers to the Fed's actions to influence the supply of money and credit in the U.S. economy. _______serves as the bank for the federal government. (Enter one word in the blank.) _______rate is the interest rate at which banks can borrow money directly from the Federal Reserve. Small denomination time deposits are part of which definition of the money supply? An important role of________banks is to make loans to banks that fall short of funds. Which of these serves as the bank to the federal government? The interest rate at which banks can borrow money directly from the Federal Reserve is called the: _________manages the supply of currency. Banks can influence the money supply by ________are organizations that connect people with money to people who want it. When people deposit money, the bank provides valuable services in return: _________requirement specifies the fraction of checkable deposits that a bank must keep on hand. Suppose the reserve requirement is 5 percent. For every $100 on deposit, the bank needs to hold $ Banks play a crucial role in determining____rates and the____supply The total reserves equal____reserves plus_____reserves If the bank keeps all of its deposits as __ ,the bank won't make any money. (Use one word for the blank.) The reserves of a bank held as currency earn little to no interest. (True or False) Because a bank may need to have only a fraction of deposits on hand, the rest is used to make____ that earn interest, which is used to cover the costs of running the bank and hopefully earn a(n)____ The reserve requirement is the____ percentage of deposits that banks must keep on hand as reserves. Loans are____to a bank and a____to the person who borrowed the money. Assume the reserve requirement is 10%. Brian deposits a check for $2,500 at his bank. Excess reserves are $ ________reserves are the total amount of reserves that a bank has some of which it is required to keep on hand. The cost of keeping more reserves than the fraction required instead of lending these funds out is the____ cost of the forgone interest the funds would have earned. People rarely take all their deposits out at once, so on any given day the bank may need to have only a(n)____ of deposits on hand to honor checks pay bills or handle normal withdrawals. ________fraction of the money in an economy is issued by the Federal Reserve; the rest is created by the_______ When a bank makes a loan, it hands over some of its____ to the person who borrowed the money. Andy deposits $100 of currency in his checking account. What effect does this transaction have on M1? Suppose the reserve requirement is 20 percent. For every $100 on deposit, the bank needs to hold $ _______reserves are equal to total reserves minus required reserves. The coins and paper money you use to buy goods and services can be printed: Which of the following are likely to occur when someone deposits money into a checking account? Suppose the reserve requirement is 5 percent. For every $100 on deposit, the bank needs to hold $ _______reserves are the total amount of reserves that a bank has some of which it is required to keep on hand. Banks can create money by making use of: The overall change in the money supply given an initial change in reserves depends on the _______is the amount by which a $1 change in reserves will change the money supply. ________reserves are equal to total reserves minus required reserves. When an individual deposits a check at the local bank, the bank's reserves increase. The bank can use most of those reserves to make ________. This _______ the money supply. Suppose the Federal Reserve has set the reserve requirement at 12%. What is the money multiplier? The actual money multiplier tends to be If the reserve requirement is 10% and we want to increase the money supply by $50 billion, the Fed will need to increase reserves by $ In order to conduct daily transactions and have a stable asset for future purchases, __________money demand is the demand for money to be used to purchase goods and services. The interest rate: Since we can't use stocks and bonds for daily transactions, people hold some of their savings as _____can affect the money supply by increasing or decreasing the number of loans they make. The demand for money comes from two sources: ________rate is the payment made to agents that lend or save money expressed as an annual percentage of the monetary amount lent or saved. _______is a situation in which the quantity supplied is greater than the quantity demanded at the current market price. This organization or person can change the money supply by increasing or decreasing the amount of reserves in the banking system: Because the money supply is independent of the interest rate, it is a is a situation in which the quantity supplied is less than the quantity demanded at the current market price. When you borrow money, you'll pay a certain interest rate; when you save, you'll earn a different interest rate. (True or False) The money supply is a vertical line because it is: Changes in the price level, changes in real GDP, and uncertainty about the future are all considered: We construct the total demand for money by adding the Apply: Money and the Federal Reserve Quiz COMBINED QUIZZES Plus Brand NEW Questions & Answers Included Use the following table to determine the levels of M1 and M2 in the United States. Money Categories in the United States. a. Calculate the M1 money supply $______ billion; Calculate the M2 money supply $_______ billion. Money Categories in the United States. Use the following table to determine the levels of M1 and M2 in the United States. a. Calculate the M1 money supply $_______ billion; b. Calculate the M2 money supply $_______ billion. Suppose that Karen deposits $400 into her checking account at the bank. The reserve requirement for Karen’s bank is 11%. Assume the bank does not want to hold any excess reserves of new deposits. a. Use this information to complete the balance sheet below to show how the bank’s assets and liabilities change when Karen deposits the $400. b. Change in Reserves: $______; Change in Loans: $_______; Change in Deposits: $_________; Why are deposits considered liabilities for a bank? Suppose that Karen deposits $500 into her checking account at the bank. The reserve requirement for Karen’s bank is 18%. Assume the bank does not want to hold any excess reserves of new deposits. a. Use this information to complete the balance sheet below to show how the bank’s assets and liabilities change when Karen deposits the $500. Change in Reserves: $______; Change in Loans: $________; Change in Deposits: $_________. Why are deposits considered liabilities for a bank? Suppose that Karen deposits $400 into her checking account at the bank. The reserve requirement for Karen’s bank is 9%. Assume the bank does not want to hold any excess reserves of new deposits. a. Use this information to complete the balance sheet below to show how the bank’s assets and liabilities change when Karen deposits the $400. Change in Reserves: $_______; Change in Deposits:$________; Change in Loans:$______.Why are deposits considered liabilities for a bank? Suppose the Federal Reserve increases the amount of reserves by $100 million and the total money supply increases by $500 million. a. What is the money multiplier? Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $30 million? Suppose the Federal Reserve increases the amount of reserves by $120 million and the total money supply increases by $480 million. a. What is the money multiplier? b. Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $40 million? Suppose the Federal Reserve increases the amount of reserves by $90 million and the total money supply increases by $270 million. A. What is the money multiplier? B. Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $30 million? When a consumer wants to compare the price of one product with another, money is primarily functioning as a Money functions as a store of value if it allows you to Money supply M1 does not include the currency held by Assets of the commercial banking system include What is one significant characteristic of fractional reserve banking? A wealthy executive is holding money, waiting for a good time to invest in the stock market. This action would be an example of the An increase in nominal GDP will Suppose the Federal Reserve buys bonds from the banking system, the money supply curve Use the following graph to answer the next question. If the initial equilibrium interest rate was 5 percent and the money supply increased by $100 billion, then the new interest rate would be Use the following table to answer the next question. If the current interest rate is 5 percent, what will be the equilibrium interest rate if the money supply falls by $100 billion dollars? The functions of money are to serve as a Which of the following functions of money enables society to gain the benefits of geographic and labor specialization? The M2 measure of money consists of the sum of Which of the following would be considered to be the most liquid? The main function of the Federal Reserve System is to Fractional reserve banking refers to a system where banks A consumer holds money to meet spending needs. This would be an example of the Which of the following varies directly with the interest rate? Who determines the size of the money supply in the United States? If, in the market for money, the amount of money supplied exceeds the amount of money households and businesses want to hold, the interest rate will An increase in the money supply is likely to reduce Holding the money deposits of businesses and households and making loans to the public are the basic functions of Which definition(s) of the money supply include(s) only items that are directly and immediately usable as a medium of exchange? Money eliminates the need for a coincidence of wants in trading primarily through its role as a If the reserve requirement were 15% percent, the value of the monetary multiplier would be Use the following graph to answer the next question. Which line in the graph would best illustrate the supply of money curve? A checkable deposit at a commercial bank is a(n) The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for The coupon rate is the Which of the following are liabilities to a bank? Other things being equal, an expansion of commercial bank lending A bank’s required reserves can be calculated by Members of the Federal Reserve Board of Governors are Money is “created” when The Federal Reserve System consists of which of the following? Assume that the required reserve ratio is 20%. A business deposits a $50,000 check at Bank A, the check is drawn against Bank B. What happens to the reserves at Bank A and Bank B? One hundred percent reserve banking refers to a situation in which banks’ reserves equal One hundred percent of their Which group is responsible for the policy decision of changing the money supply? A bank has $2 million in checkable deposits. In the bank’s balance sheet, this would be part of What function is money serving when you deposit it in a savings account? Which of the following items are included in money supply M2 but not M1? Use the following graph to answer the next question. Which line in the graph above would best illustrate the asset demand for money curve? Cash held by a bank in its vault is part of the bank’s If product prices were stated in terms of tobacco leaves, then tobacco leaves would be functioning primarily as One year before maturity the price of a bond with the principal amount of $1,000 and a coupon rate of 5% paid annually fell to $981. The one year interest rate must be Credit card balances are not considered to be money primarily because they Traditionally, the Federal Reserve can give emergency loas only to A Bank’s net worth is equal to its __________is any item that both buyers and sellers will accept in exchange for goods and services. (Enter one word in the blank.) When people specialize and produce the goods for which they have a(n) Gold, silver, and other metals have been used as Comparisons of the value of goods relative to everything else are easy when money is used as: Knowing how much money an economy has matters because it helps determine interest rates and prices. (True or False) ________as a means of exchange in our economy makes it easier for people to make transactions with each other. The Federal Reserve is commonly called the You can specialize at doing one thing whether its fixing cars, teaching economics, making cakes, or building websites in an economy that uses: _________consists of the most liquid forms of money. The first time money represented value, instead of being intrinsically valuable like a gold coin, was: A deposit account that accepts deposits and purchases bonds and commercial debt that pay interest is a: When used as an asset that is commonly used to facilitate trade between buyers and sellers, money is: ____in active circulation includes money in everyone's pockets and is part of____ You can write a check to pay for goods and services. The check itself is: Which entity controls the money supply? Which of the following is considered money? M1 consists of the most____ forms of money Which of the following is a primary role of the Federal Reserve? _____deposit is an interest-bearing deposit held by a bank or financial institution for a fixed term, whereby the depositor can only withdraw the funds after giving notice. Monetary policy affects____ rates charged on loans and paid on savings. is the measure of money supply that contains currency or assets that can almost immediately be transferred into currency without penalty. The fraction of checkable deposits that banks must keep on hand as reserves either as currency or on deposit with the Federal Reserve is called the: When a check_____and money is transferred out of a checking account, it is the transfer of funds that constitutes the actual payment for the good and service. The primary entity charged with supervision and regulation of member banks to prevent banking panics or disruptions is called the Which of the following is the primary entity charged with supervision and regulation of member banks to prevent banking panics or disruptions? Deposits that automatically transfer money balances from savings accounts to checking accounts are part of which definition of the money supply? Directing monetary policy and supervising member banks is done by: The entity that is responsible for overseeing research into domestic and international financial conditions and investigating the health of the U.S. economy, the effect of banking laws, and other issues that consumers and businesses face is the: _________policy refers to the Fed's actions to influence the supply of money and credit in the U.S. economy. _______serves as the bank for the federal government. (Enter one word in the blank.) Which of these serves as the bank to the federal government? ________rate is the interest rate at which banks can borrow money directly from the Federal Reserve. Small denomination time deposits are part of which definition of the money supply? An important role of____ banks is to make loans to banks that fall short of funds. The interest rate at which banks can borrow money directly from the Federal Reserve is called the: _________manages the supply of currency. Banks can influence the money supply by ________are organizations that connect people with money to people who want it. When people deposit money, the bank provides valuable services in return: ________requirement specifies the fraction of checkable deposits that a bank must keep on hand. Suppose the reserve requirement is 5 percent. For every $100 on deposit, the bank needs to hold $ Suppose the reserve requirement is 20 percent. For every $100 on deposit, the bank needs to hold $ Banks play a crucial role in determining____rates and the____supply The total reserves equal____reserves plus_____reserves If the bank keeps all of its deposits as __ ,the bank won't make any money. (Use one word for the blank.) The reserves of a bank held as currency earn little to no interest. (True or False) Because a bank may need to have only a fraction of deposits on hand, the rest is used to make____ that earn interest, which is used to cover the costs of running the bank and hopefully earn a(n)____ The reserve requirement is the____ percentage of deposits that banks must keep on hand as reserves. Loans are____to a bank and a____to the person who borrowed the money. Assume the reserve requirement is 10%. Brian deposits a check for $2,500 at his bank. Excess reserves are $ ________reserves are the total amount of reserves that a bank has some of which it is required to keep on hand. The cost of keeping more reserves than the fraction required instead of lending these funds out is the____ cost of the forgone interest the funds would have earned. People rarely take all their deposits out at once, so on any given day the bank may need to have only a(n)____ of deposits on hand to honor checks pay bills or handle normal withdrawals. ________fraction of the money in an economy is issued by the Federal Reserve; the rest is created by the_______ When a bank makes a loan, it hands over some of its____ to the person who borrowed the money. Andy deposits $100 of currency in his checking account. What effect does this transaction have on M1? _______reserves are equal to total reserves minus required reserves. The reserves of a bank held as currency earn little to no interest. (True or False) The coins and paper money you use to buy goods and services can be printed: Which of the following are likely to occur when someone deposits money into a checking account? If someone deposits money into a checking account, the bank’s _______reserves are the total amount of reserves that a bank has some of which it is required to keep on hand. Banks can create money by making use of: When an individual deposits a check at the local bank, the bank's reserves___. The bank can use most of those reserves to make____ The overall change in the money supply given an initial change in reserves depends on the If someone deposits money into a checking account, the bank’s: _______is the amount by which a $1 change in reserves will change the money supply. ________reserves are equal to total reserves minus required reserves. When an individual deposits a check at the local bank, the bank's reserves increase. The bank can use most of those reserves to make ________. This _______ the money supply. Suppose the Federal Reserve has set the reserve requirement at 12%. What is the money multiplier? The actual money multiplier tends to be If the reserve requirement is 10% and we want to increase the money supply by $50 billion, the Fed will need to increase reserves by $ If someone deposits money into a checking account, the bank’s In order to conduct daily transactions and have a stable asset for future purchases, __________money demand is the demand for money to be used to purchase goods and services. The interest rate: Since we can't use stocks and bonds for daily transactions, people hold some of their savings as _____can affect the money supply by increasing or decreasing the number of loans they make. The demand for money comes from two sources: ________is the payment made to agents that lend or save money. ________rate is the payment made to agents that lend or save money expressed as an annual percentage of the monetary amount lent or saved. _______is a situation in which the quantity supplied is greater than the quantity demanded at the current market price. This organization or person can change the money supply by increasing or decreasing the amount of reserves in the banking system: Because the money supply is independent of the interest rate, it is a is a situation in which the quantity supplied is less than the quantity demanded at the current market price. When you borrow money, you'll pay a certain interest rate; when you save, you'll earn a different interest rate. (True or False) The money supply is a vertical line because it is: Changes in the price level, changes in real GDP, and uncertainty about the future are all considered: We construct the total demand for money by adding the _________market is a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances.


ECO/372T Week 5 Everything listed for Week 5 is included in purchase!! *ECO/372T Week 5 Tutorials Kit includes:* 1. Discussion Question:TFiscal Policy during a Recession 2. Apply: Fiscal and Monetary Policy Quiz 3. Practice: Fiscal and Monetary Policy Quiz Discussion - Fiscal Policy During a Recession Discuss the limitations of fiscal policy during a recession. What fiscal policy has been used during previous recessionary periods? How does the fiscal policy during the COVID-19 recession differ from normal recessions? Provide a minimum of 2 forms of difference. Apply: Summative Assessment: Fiscal and Monetary Policy Quiz Includes Questions and Answers, plus additional NEW questions - A+ Work! A newspaper headline reads: ‘Fed Cuts Federal Funds Rate for Fifth Time This Year.” This headline indicates that the Federal Reserve is most likely trying to Smoothing the peaks and troughs of the business cycle with fiscal policy is Suppose the reserve requirement is initially set at 5%. a. At a reserve requirement of 5%, what is the value of the money multiplier? ___________; b. If the reserve requirement is 5% and the Fed increases reserves by $30 billion, what is the total increase in the money supply? ______ Suppose the Fed raises the reserve requirement to 8%. What is the value of the money multiplier now? ______ d.. Assume the reserve requirement is 8%. If the Fed increases reserves by $30 billion, what is the total increase in the money supply? _________; e. Raising the reserve requirement from 5% to 8% ___________ the money multiplier and ________the money supply. ____________________ Suppose the reserve requirement is initially set at 10%. a. At a reserve requirement of 10%, what is the value of the money multiplier? ______; b. If the reserve requirement is 10% and the Fed increases reserves by $40 billion, what is the total increase in the money supply?________; c. Suppose the Fed raises the reserve requirement to 20%. What is the value of the money multiplier now? _____; d. Assume the reserve requirement is 20%. If the Fed increases reserves by $40 billion, what is the total increase in the money supply?_______; e. Raising the reserve requirement from 10% to 20% _________the money multiplier and _________ the money supply. Use the following graph to answer the next question. What combination would most likely cause a shift from AD1 to AD2? The purpose of expansionary monetary policy is to increase Use the following figure to answer the next question. The economy is at equilibrium at point A. What fiscal policy would be most appropriate to control demand-pull inflation? A contraction of the money supply A restrictive monetary policy is designed to shift the aggregate Use the following graph to answer the next question. In the diagram, Qf is the full-employment output. A contractionary fiscal policy would be most appropriate if the economy’s present aggregate demand curve were at The interest rate that banks charge one another for the loan of excess reserves is the An expansionary monetary policy Use the following graph to answer the next question. The economy is at equilibrium at point C, which is below potential output. What fiscal policy would increase real GDP? The purpose of a contractionary monetary policy is to The sale of government bonds by the Federal Reserve Banks to commercial banks will An increase in the reserve requirement When the Federal government uses taxation and spending actions to stimulate the economy it is conducting: Which of the following is an example of built-in stability? As real GDP decreases: The so-called "negative taxes" are better known as: Due to automatic stabilizers, when income rises, Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that: When the Federal government takes budgetary action to stimulate the economy or rein in inflation, such policy is: Refer to the above graph. A budget surplus would be associated with GDP level: In the above graph, tax revenues vary Refer to the above graph. Automatic stability in this economy could be enhanced by: Actions by the Federal government that decrease the progressivity of the tax system Which of the following serves as an automatic stabilizer in the economy? In Year 1, the actual budget deficit was $200 billion and the cyclically-adjusted deficit was $150 billion. In Year 2, the actual budget deficit was $225 billion and the cyclically-adjusted deficit was $175 billion. It can be concluded that fiscal policy from Year 1 to Year 2 became more In Year 1, the actual budget deficit was $150 billion and the cyclically-adjusted deficit was $125 billion. In Year 2, the actual budget deficit was $130 billion and the cyclically-adjusted deficit was $125 billion. It can be concluded that discretionary fiscal policy from Year 1 to Year 2 was If you are told that the government had an actual budget deficit of $50 billion, then you would: 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 If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement: The crowding-out effect suggests that: The crowding-out effect arises when: The crowding-out effect works through interest rates to: The United States is experiencing a recession and Congress decides to adopt an expansionary fiscal policy to stimulate the economy. In this case, the crowding-out effect suggests that investment spending would: If the crowding-out effect is at its maximum strength, it follows that an increase in government spending would: Assume the economy is at full employment but planned investment exceeds saving. Other things being equal, what fiscal policy actions would best address this problem? The effect of an increase in the government budget deficit on the equilibrium level of GDP is essentially the same as a(n): The public debt is the: How is the public debt calculated? A Federal budget deficit is financed by the: The two reasons why bankruptcy is a false concern regarding the public debt are: A major reason that the public debt cannot bankrupt the Federal government is because: A change in aggregate demand due to an increase in transfer payments is equivalent in the aggregate expenditure model to: Fiscal policy is enacted through changes in If Congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of a(n): If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n): The goal of expansionary fiscal policy is to increase: If the government wishes to increase the level of real GDP, it might reduce Refer to the above graph. What combination would most likely cause a shift from AD1 to AD2? Refer to the above graph. What combination would most likely cause a shift from AD1 to AD3? Which combination of fiscal policy actions would most likely be offsetting? An expansionary fiscal policy can be illustrated by a: Refer to the figure above. The economy is at equilibrium at point A. What fiscal policy would be most appropriate to control demand-pull inflation? Refer to the figure above. The economy is at equilibrium at point B. What would expansionary fiscal policy do? Refer to the figure above. The economy is at equilibrium at point C which is below potential output. What fiscal policy would increase real GDP? If the economy is in a recession and prices are relatively stable, then the discretionary fiscal policy or policies that would most likely be recommended to correct this macroeconomic problem would be Contractionary fiscal policy would tend to make a budget deficit become: Assume economy is in a recession with price level of P1 and output level Q1. The government then adopts a discretionary fiscal policy. What will be the most likely new equilibrium price level and output? Assume that the economy initially has a price level of P1 and output level Q1. If the government implements expansionary fiscal policy, and the full multiplier effect was felt, it would bring the economy to: When government spending is increased, the amount of the increase in aggregate demand primarily depends on: If a government wants to pursue an expansionary fiscal policy, then a tax cut of a certain size will be more expansionary when the: A given reduction in government spending will dampen demand-pull inflation by a greater amount when the: A key feature of all automatic stabilizers is that they The existence of lags in designing and implementing fiscal policy helps illustrate some of the limitations of fiscal policy aimed at easing the burdens of a recession. One timing problem in using fiscal policy to counter a recession is the “recognition lag” that occurs between the Payments made by the government that do not require an exchange of economic activity in return are also known as Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government’s budget that If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n) Which of the following serves as an automatic stabilizer in the economy? When the federal government uses taxation and purchasing actions to stimulate the economy it is conducting Unemployment compensation is The intent of contractionary fiscal policy is to If taxes and government expenses did not vary with income, then income would As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon be… Using the fiscal policy to stabilize the economy is difficult because One timing problem in using fiscal policy to counter a recession is the “implementation lag” that occurs between the Which of the following is an example of built-in stability? As real GDP decreases, The discount rate is the Choose the best response for each of the following statements. a. When the Federal Reserve makes an open market purchase, the Fed; b. If the Fed wants to increase interest rates, it should make an__________. This would _________ the money supply and achieve the increase in interest rates. Traditionally, the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in its target for the The purchase and sale of government securities by the Fed is called Which of the following is a tool of monetary policy often use by the Fed for altering the reserves of commercial banks? Financial markets pay close attention to changes in the federal funds rate because these changes If the Fed buys government securities from commercial banks in the open market An increase in the money supply, all else held constant, usually The purpose of expansionary monetary policy is to increase The interest rate that banks charge one another for the loan of excess reserves is the The discount rate is the interest Which of the monetary policy tools can alter both the level of excess reserves and the money multiplier? Which of the following statements is correct? The interest rate that banks use as a reference point for interest rates on a wide range of loans to businesses and individuals in the The demand curve for federal funds is Practice Homework: Fiscal and Monetary Policy Quiz Includes Questions and Answers, plus additional NEW questions - A+ Work! Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called The application of fiscal policy to increase aggregate demand is called The concept that an additional dollar of expenditures will result in the creation of more than one dollar’s worth of real GDP is called the The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called: The condition AD = AS refers to Fiscal policy is: When taxes increase, AD: This policy involves increasing government purchases and/or decreasing taxes. What is the effect of a successful expansionary fiscal policy on price level and output? The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called full The application of fiscal policy to decrease aggregate demand is called a(n) The condition Y = Yfull employment refers to The concept that an additional dollar of expenditure will result in the creation of more than one dollar’s worth of real GDP is called the When government spending decreases, AD: Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called: Price level and output both increase from a successful ___________ fiscal policy. When government spending decreases, AD: The path to recovery using fiscal policy involves a jump start of decreased government spending followed by multiple rounds of decreased The concept that an additional dollar of expenditures will result in the creation of more than one dollar’s worth of real GDP is called: What is the effect of a successful contractionary fiscal policy on price level and output? Fiscal policy relies on three assumptions:1. Recognizing the start of a recession; 2. Government quickly determines effective policy; 3. The policy is immediately effective. Which of these assumptions hold in the real world? The path to recovery using fiscal policy involves a jump start of decreased We cannot know that a recession is occurring until we are in it. (True or False) True A(n)_____occurs when an economy experiences a(n)______ in real GDP for at least two consecutive quarters or six months. Lags hamper the effectiveness of _________policy refers to the Fed’s actions to influence the supply of money and credit in the U.S. economy. market is a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances. _________policy primarily affects the economy by either encouraging or discouraging investment in new capital. An increase in the money Monetary policy affects A money market is: A reduction in the money supply designed to slow down economic activity is called __________demand describes the overall or total demand for all final goods and services produced in an economy. Monetary policy primarily affects an economy by either encouraging or discouraging The money multiplier is the amount by which a $1 change: To influence the money supply and interest rates, the Federal Reserve buys or sells government debt. This is called: Changing the money supply can affect: The Federal Reserve can influence real GDP by changing the money The Federal Reserve changes the amount of money in circulation by: The fraction of checkable deposits that banks must keep on hand as reserves either as currency or on deposit with the Federal Reserve is called the: The money multiplier equals: Which of the following describes a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances? A formal market for overnight loans of federal reserves is the: The federal funds rate is the interest rate that banks pay when borrowing reserves from other To make sure banks meet the daily needs of customers, the Federal Reserve enforces a: The interest rate that banks pay one another for borrowing reserves or federal funds overnight so they can meet the reserve requirements set by the Federal Reserve is the: Which of the following does the Fed carefully monitor? The payment made to agents that lend or save money expressed as an annual percentage of the monetary amount lent or saved is called the __ rate. ________reserves are equal to total reserves minus required reserves. Which of the following are also names for the interest rate? The negative relationship between the quantity of new physical capital demanded by firms and the prevailing interest rate describes Investment demand can be described as: Answer the next Question on the basis of the information in the following table, investment in billions. Suppose the Fed reduces the interest rate from 6 percent to 4 percent. As a result of this decrease in the interest rate, using column (2) investment will Use the information in the following table to answer the next question. In the table, investment is in billions. Suppose the Fed increases the Interest rate from 5 percent to 6 percent. As a result of this increase in the interest rate, using column (2) investment will Changes in interest rates, all else held constant, cause a shift in An increase in the money supply, all else held constant, usually If the Fed wishes to reduce nominal interest rates, it must engage in an open market ______ of bonds to ______ the money supply. Lowering the reserve requirement The interest rate at which the Federal Reserve Banks lend to commercial banks is called the The federal funds rate is the interest rate that _______ charge(s) _______. Which of the following statements is true? In the graphs, the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the level of investment spending associated with each curve, respectively. All numbers are in billions of dollars. The interest rate and the level of investment spending in the economy are at point B on the investment demand curve. To achieve the long-run goal of a noninflationary, full-employment output of Qf in the economy, the Fed should The major problem facing the economy is high unemployment and weak economic growth. The inflation rate is low and stable. Therefore, the Federal Reserve decides to pursue a policy to increase the rate of economic growth. Which policy changes by the Fed would reinforce each other to achieve that objective? Which of the following represents the chain of causation for expansionary policy? A contractionary monetary policy If the Federal Reserve wants to prevent inflation, it should Suppose the economy is experiencing a recession. If the Federal Reserve enacts expansionary monetary policy, interest rates will likely