Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
30 Cards in this Set
- Front
- Back
|
Paper money
|
(C) is valuable because it is generally accepted in trade.
|
|
|
The Federal Reserve does all except which of the following?
|
(C) make loans to individuals.
|
|
|
Members of the Board of Governors
|
(A) are appointed by the U.S. president, while presidents of the Federal Reserve regional banks are appointed by the banks’ boards of directors.
|
|
|
The Fed’s primary tool to change the money supply is
|
(C) conducting open market operations.
|
|
|
A bank loans Zippo’s Print Shop $350,000 to remodel a building near campus to us as a new store. On their balance sheet this loan is
|
(A) an asset for the bank and a liability for Zippo’s. The loan increases the money supply.
|
|
|
Suppose a bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned all it can given the reserve requirement.
|
(B) It has $500 in reserves and $,4500 in loans.
|
|
|
The managers of the bank where you work tells you that your bank has $5 million in excess reserves. She also tells you that the bank has $300 million in deposits and $255 million dollars in loans. Given this information you find that the reserve requirement must be
|
(D) 40/300.
|
|
|
If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would
|
(C) fall from 10 to 5.
|
|
|
If the reserve ratio is 100 percent, depositing $500 of paper money in a bank
|
(B) leave the size of the money supply unchanged.
|
|
|
The Fed increases the reserve requirement and makes open market purchases. Which of these by itself will increase the money supply
|
(D) Only the open market purchases.
|
|
|
During a recession the economy experiences
|
(D) falling employment and income.
|
|
|
According to classical macroeconomic theory, changes in the money supply affect
|
(B) nominal variables, but not real variables.
|
|
|
Other things the same, as the price level rises, exchange rates
|
(A) and interest rates rise.
|
|
|
Other things the same, the aggregate quantity of goods demanded decreases if
|
(D) all of the above are correct.
|
|
|
A decrease in U.S. interest rates leads to
|
(A) a depreciation of the dollar that leads to greater net exports.
|
|
|
When taxes increase, consumption
|
(B) decreases, as shown by shifting aggregate demand to the left.
|
|
|
The aggregate supply curve is upward sloping rather than vertical in
|
(C) the long run, but not the short run.
|
|
|
Which of the following shifts long-run aggregate supply right?
|
(A) an increase in either the physical or human capital stock.
|
|
|
Imagine the economy is long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then we would expect that in the short run
|
(D) the price level will fall, and real GDP might rise, fall, or stay the same.
|
|
|
Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, then in the short-run we would expect
|
(A) real GDP will rise and the price level might rise, fall, or say the same.
|
|
|
According to liquidity preference theory, equilibrium in the money market is achieved by adjustments in
|
(B) the interest rate.
|
|
|
When the Fed sells government bonds, the reserves of the banking system
|
(D) decrease, so the money supply decreases.
|
|
|
People are likely to want to hold more money if the interest rate
|
(D) decreases, making the opportunity cost of holding money fall.
|
|
|
In the current interest rate is 2 percent,
|
(B) people will sell more bonds, which drives interest rates up.
|
|
|
If the interest rate increases
|
(D) or the price level decreases, people will want to hold less money.
|
|
|
Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate demand curve?
|
(D) As the price level increases, the interest rate rises, so spending falls.
|
|
|
If the MPC = 3/5, the then government purchases multiplier is
|
(B) 5/2.
|
|
|
Which of the following correctly explains the crowding-out effect?
|
(B) An increase in government expenditures increases interest rate and so reduces investment spending.
|
|
|
Assuming no crowding-out, or multiplier effects, a $100 billion increase in government expenditures shifts aggregate demand
|
(B) right by $100 billion.
|
|
|
The multiplier effect
|
(D) amplifies the effects of an increase in government expenditures, while the crowding-out effect diminishes the effects.
|
