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53 Cards in this Set

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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:
Fall, causing households and businesses to hold more money.
Discretionary fiscal policy is so named because it:
Involves specific changes in T and G undertaken expressly for stabilization at the option of Congress.
The discount rate is the interest:
Rate at which the Federal Reserve Banks lend to commercial banks.
On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the total demand for money can be found by:
Horizontally adding the transactions and the asset demand for money
If in the market for money the quantity of money demanded exceeds the money supply, the interest rate will:
Rise, causing households and businesses to hold less money.
If the quantity of money demanded exceeds the quantity supplied
The interest rate will rise
Suppose the Federal government had budget surpluses of $80 in year 1 and $120 billion in year 2 but had budget deflects of $10 billion in year 3 and $40 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. AT the end of these four years, the Federal government’s public debt would have:
Decreased by $150 billion
The purpose of a restrictive monetary policy is to:
Raise interest rates and restrict the availability of the bank credit
The equilibrium rate of interest in the market for money is determined by the intersection of the:
Supply of money curve and the total demand for money curve
When the required ratio is increased, the excess reserves of member banks are:
Reduced and the multiple by which the commercial banking system can lead is reduced
The four main tools of monetary policy are:
The discount rate, the reserve ratio, the term action facility, and open-market operations.
If the Federal Reserve authorities were attempting to reduce demand-pull inflation, the proper policies would be to:
Sell government securities, raise reserve requirement, raise the discount rate, and reduce the amount of reserves available through the term action family.
Which of the following represents the most contractionary fiscal policy:
A $30 billion decrease in government spending
The public debt is the amount of money that:
the Federal government owes to holders of the U.S. securities
The U.S. public debt:
Consist of the historical accumulation of all past Federal deficits and surpluses
If the economy were encountering a severe recession, proper monetary and fiscal policies would call for:
Buying government securities, reducing the reserve ratio, reducing the discount rate, increasing reserves available through the term auction facility, and a budgetary deflect.
If severe demand-pull inflation was occurring in the economy, proper government policies would involve a government:
Surplus and the sale of securities in the open market, a higher discount rate, and higher reserve requirements.
According to the Taylor rule:
If real GDP rises by 2 percent above potential GDP, the Fed should raise the real Federal funds rate by 1 percentage point
The interest rate at which the Federal Reserve Banks lend to commercial banks is called the:
Discount rate
Which of the following is a tool of monetary policy?
Open market operations
Which of the following is not a tool of monetary policy?
Changes in banking laws
Which of the following is considered a legitimate concern of a large public debt?
Crowding-out of private investments
Expansionary fiscal policy is named because it:
Is designed to expand real GDP
The Federal Reserve System regulates the money supply primarily by:
Altering the reserves of commercial banks, largely through sales and purchases of government bonds
Discretionary fiscal policy refers to:
Intentional changes in taxes and government expenditures made by Congress to stabilize the economy
Which of the following will increase commercial bank reserves?
The purchase of government bonds in the open market by the Federal Reserve Banks
In an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will:
Shift the AD curve to the left
An increase in the legal reserve ratio:
Decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier
A bond having no expiration date: bond price=$1000; bond fixed annual interest payment= $100; bond annual interest rate = 10 percent
Fall to 8 percent
Suppose the price level is fixed, the MPC is .8, the GDP gap is a negative $200 billion. To achieve full-employment output (exactly) government should:
Increase government expenditures by $40 billion
According to the Taylor rule, if inflation has risen by 6 percentage point above its target of 2 percent, the Fed should:
Raise the real Federal funds by 3 percentage points
An appropriate fiscal policy for severe demand-pull inflation is:
A tax rate increase
Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?
Reductions in Federal tax rates on personal and corporate income
The asset demand for money:
Varies inversely with the rate of interest
On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the transactions demnd for money can be represented by:
A vertical line
An appropriate fiscal policy for a severe recession is:
A decrease in tax rates
Public investment?
Construction of highways
Which of the following represents the most expansionary fiscl policy?
A $10 billion increase in government spending
Suppose the price level is fixed, the MPC is .5 and the GDP is a negative billion. To achieve full-employment output, government should:
Increase government expenditures by %50
The basic policy-making body in the U.S. banking system is the
Board of Governors of the Federal Reserve
In the U.S. economy the money supply is controlled by the
Federal Reserve System
The Federal Open Market Committee is made up of
7 members of the board of governors of the federal reserve system along with the president of the NEW York Federal reserve bank and four other federal reserve bank presidents on a rotating basis
The transaction demand for money is most closely related to money functioning as
Medium of exchange
The asset demand for money is most closely related to money functioning as a
Store of value
If in the market for money the quantity of money demanded exceeds the money supply, the interest rate will:
Rise, causing households and businesses to hold less money
The asset demand for money is most clearly related to money functioning as a:
Store value
When a commercial bank borrows from Federal Reserve Bank:
The commercial bank’s lending ability is increased
Open-market operations refer to:
The purchase of stocks in the New York Stock Exchange
Contractionary fiscal policy is named because it:
Is aimed at reducing aggregate demand and thus achieving price stability
Which of the following is not considered a legitment concern of a large public debt:
Bankruptcy of the Federal Government
If the demand for money and the supply of money both decrease, the equilibrium:
Quantity of money will decline, but we cannot predict the change in the equilibrium interest rate
Suppose the Federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluse of $20 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years the Federal government’s public debt would have:
Increased by $20 billion
The public debt is held as:
Treasury bills, treasury notes, treasury bonds, and U.S. saving bonds