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Econ Chapter 12

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Econ Chapter 12

  
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1.  The disctinction between M1 and M2 is based on
A.
B.
C.
D.
E.
2.  One difference between the items in M1 and those which are added to compute M2 is that
A.
B.
C.
D.
E.
3.  The early goldsmiths issues money in the form of 
A.
B.
C.
D.
4.  Credit Cards are
A.
B.
C.
D.
E.
5.  The definition of the money supple that includes coine, paper money, travelers' checks, checking accounts in commerical banks, Now accounts, and checkable deposits at credit unions is knows as
A.
B.
C.
D.
6.  Barter is a system of
A.
B.
C.
D.
7.  An important effect of fractional reserve banking is that bankers have
A.
B.
C.
D.
E.
8.  Money is an imperfect store of value when
A.
B.
C.
D.
E.
9.  In the short run, tax cuts that are intended to increase aggregate supply have
A.
B.
C.
D.
10.  If the Fed decieds to sell bonds, it decreased demand for bonds. how will that affect the price of bonds and the interest rate?
A.
B.
C.
D.
11.  Members on the board of Governers of the Fed are
A.
B.
C.
D.
12.  The financial costs of the S&L bailout will be borne primarily by the 
A.
B.
C.
D.
13.  The quantity of money demanded varies
A.
B.
C.
D.
14.  Consequent to a secret open market operation, bon prices fell. we can deduce that the Fed probably
A.
B.
C.
D.
E.
15.  Which of the following is not a method to reduce the inflationary gap
A.
B.
C.
D.
16.  The supply-of-money curve has a positive slope because
A.
B.
C.
D.
E.
17.  If the Fed buys a bond from a commercial bank, how will it pay for the bond?
A.
B.
C.
D.
E.
18.  The type of money in circulation in the contemporary united states is almost entirely
A.
B.
C.
D.
E.
19.  Expansionary fiscal policy can cause a rise in real GDP in combination with
A.
B.
C.
D.
20.  Assume that the required reserve ration is 10%. a deposit of new money of 200,000 will lead to a total maxium expansion of bank deposits of 
A.
B.
C.
D.
E.
21.  Assume the required reserve ratio is 25% and the POMC orders an open market purchase of 200 million. if the banks do not want to hold excess reserves and the public does not want to hold additional cash, then the money supply will
A.
B.
C.
D.
22.  Under fractional reserve banking, when a bank lends to a customes
A.
B.
C.
D.
E.
23.  In contrast to changes in gov. spending, tax changes affect spending
A.
B.
C.
D.
24.  In 2000, many economists believed that the most serious macroeconomic problem confronting the US economy was an inflationary gap. which policies whould be effective in dealing with this problem?
A.
B.
C.
D.
25.  The money creation process generated by an injection of reserves stops when
A.
B.
C.
D.
26.  If the Fed were to cut the money supply at the same time the federal government was cutting taxes then we could expect
A.
B.
C.
D.
27.  In order to maintain a balanced budget, congress has decided to cut taxes and government spending both by 25 billion. what will happen to GDP?
A.
B.
C.
D.
28.  The near-term effect of an unexpected sale of bonds by the Fed is
A.
B.
C.
D.
29.  Of the objectives of supply-side policies is to
A.
B.
C.
D.
30.  When the fed wishes to contract the money supply it can
A.
B.
C.
D.
31.  A "liberal" would most likely argue in favor of 
A.
B.
C.
D.
32.  Some opponents of the federal reserve system believe that
A.
B.
C.
D.
33.  A reduction in the capital gains tax, often advocated by proponents of supply-side economics, is supposed to stimulate increased
A.
B.
C.
D.
34.  If congress votes to increase governemnt purchases and at the same time decrease personal income taxes, they
A.
B.
C.
D.
35.  Decreasing aggregate demand to eliminate and inflationary gap often creates the problem of
A.
B.
C.
D.
36.  The banking system recieves a new cash deposti of 200,000. total deposits raise to 2,000,000. the value of the reserve ration is..
A.
B.
C.
D.
37.  If you knew in advance that the Fed was going to pursue an open market operation to create excess reserves, you would
A.
B.
C.
D.
E.
38.  When the federal reserve system was first establised, its founders intended it to 
A.
B.
C.
D.
39.  Which of the following will shift the aggregate demand curve outward?
A.
B.
C.
D.
40.  Which of the following is correct?
A.
B.
C.
D.
41.  In practice, short-term interest rates and the money supply are determined by 
A.
B.
C.
D.
E.
42.  How does an increase in taxes affect the expenditure schedule?
A.
B.
C.
D.
43.  In which case is monetary policy most potent in terms of impact on aggregate demand
A.
B.
C.
D.
44.  How does an decrease in taxes affect the expenditure schedule?
A.
B.
C.
D.
45.  What is the shape of the aggregate supply curve that is most likely to result in inflation from expansionary monetary policy
A.
B.
C.
D.
46.  For any given change in taxes, the multiplier
A.
B.
C.
D.
47.  You purchased a bond in 1985 for 1,000 that pays 60 per year interest. if you sell the bond for 500, the purchaser will earn an effective interest rate of 
A.
B.
C.
D.
E.
48.  When we subtract a personal income tax to the macroeconomic model, the 
A.
B.
C.
D.
49.  The federal reserve banks are corporations, the stockholders of which are
A.
B.
C.
D.
E.
50.  If the Fed increases the discount rate, what happens to reserces and the money supply?
A.
B.
C.
D.
51.  In a 45 degree line diagram, the sensitivity of incestment spending to the interest rate is reflected in
A.
B.
C.
D.
52.  If the public begins to hold more cash in wallets and elsewhere, the money supply will 
A.
B.
C.
53.  Disposable income is the income actually available to the customers that determines aggregate demand
54.  Government regulations to unsure the safety of depositors and to control the nation's money supply include
A.
B.
C.
D.
55.  The money supply contracts when the fed
A.
B.
C.
D.
56.  The money supply grows when 
A.
B.
C.
D.
57.  The Fed cannot predict the consequence of its actions with perfect accuracy because of 
A.
B.
C.
D.
58.  One reason why the cost of the S&L clean up was so expensive is that 
A.
B.
C.
59.  An eccentric millionaire dies and leaves the 1,000,000 cash stuffed in his mattress. if the required reserve ration is 25%, what will happen to the nations's money supply? assume that no banks keep excess reserves and no indiviudals or firms hold cash.
A.
B.
C.
D.
60.  The oversimplifies formula for the multilpier yelds a number that is too large doe to the exclusion of
A.
B.
C.
D.
61.  During a period of wide and rapid business fluctuation, a profit oriented bank will behave in a way that 
A.
B.
C.
D.
E.
62.  The effect of monetary policy on aggregate deman depends upon
A.
B.
C.
D.
E.
63.  Ed kane has written critically of government supervision of the S&L indusrty. His term "zombie S&L" refers to the fact that..
A.
B.
C.
D.
64.  An automatice stabilizer is a feature of the economy that
A.
B.
C.
D.
65.  To eliminate an inflationary gap, the expenditure schedule should
A.
B.
C.
D.
66.  To eliminate an recessionary gap, the expenditure schedule should
A.
B.
C.
D.
67.  Government transfer payments
A.
B.
C.
D.
68.  An increase in social security payments to retired persons has what effeect on equilibrium income?
A.
B.
C.
D.
69.  Liquidity refers to 
A.
B.
C.
D.
70.  Critics of the supply-side economice argue that a major flaw is
A.
B.
C.
D.
71.  Assume that the banking system has 400 billion in reserces. there are no excess reserces in the system. if the reserve requirement is dropped from 10% to 9.5% what will happen to the lecel of excess reserves in the system?
A.
B.
C.
D.
E.
72.  Everything else equal, which of the following will raise interest rates?
A.
B.
C.
D.
E.
73.  A decrease in social security payments to retired persons has what effeect on equilibrium income?
A.
B.
C.
D.
74.  The quantity of money demanded falls as interset rates raise because
A.
B.
C.
D.
75.  If the public begins to hold less cash in wallets and elsewhere, the money supply will 
A.
B.
C.
76.  If the demand-side effects of supply-side tax cuts are greater than the supply-side effects, then we can expect the result to be a(n)
A.
B.
C.
D.
77.  Congress is debating whether to raise taxes by 100billion or decrease spending by 100 billion in order to eliminate budgit deficit. which action will have the larger efect on equilibrium GDP?
A.
B.
C.
D.
78.  An increase in the price level will cause autonomous investment to call fecause a higher price level
A.
B.
C.
D.
79.  If the federal oppen market committee orders a puchase of governmetn securities from banks, where does the federal reserve get the money to pay for the securities?
A.
B.
C.
D.
80.  Which of the following individuals would most likely facor an increase in government spening as opposed to a tax cut, as the basis for expansionary fiscal policy?
A.
B.
C.
D.
81.  Fiscal policy is designed for
A.
B.
C.
D.
82.  A "conservative" would most likely argue in favor of 
A.
B.
C.
D.
83.  Banks will hole substantial excess reserves when
A.
B.
C.
D.
84.  Excess reserves make a bank less vulnerable to runs, but bankers dont liek to hold exvess reserves because
A.
B.
C.
D.
85.  Supply-side tax cuts tend to benegit the rich because tax cuts
A.
B.
C.
D.
E.
86.  If banks keep only a fraction of deposits on hand, they might be vulnerable to
A.
B.
C.
D.
E.
87.  If congress votes to decrease governemnt purchases and at the same time increase personal income taxes, they
A.
B.
C.
D.
88.  When interest rates increase, banks would normally want to  
A.
B.
C.
D.
E.
89.  One problem for economic stability is that in an economic upswing
A.
B.
C.
D.
E.
90.  Under what conditions will the inflationary impact of expansionary monetary policy be the smallest
A.
B.
C.
D.
E.
91.  Contractionary monetary policy will tend to have what effects
A.
B.
C.
D.
92.  If the Fed wants to give banks more reserves, it can
A.
B.
C.
D.
E.
93.  When we add a personal income tax to the macroeconomic model, the 
A.
B.
C.
D.
94.  The willingness of profit-orientated banks to make loans
A.
B.
C.
D.
95.  As a general rule, one would never keep on deposit at an FDIC insured bank an amount greated than..
A.
B.
C.
D.
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