Econ Chapter 12

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Econ Chapter 12

  
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1.  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.
2.  In which case is monetary policy most potent in terms of impact on aggregate demand
A.
B.
C.
D.
3.  A reduction in the capital gains tax, often advocated by proponents of supply-side economics, is supposed to stimulate increased
A.
B.
C.
D.
4.  An increase in social security payments to retired persons has what effeect on equilibrium income?
A.
B.
C.
D.
5.  In practice, short-term interest rates and the money supply are determined by 
A.
B.
C.
D.
E.
6.  When we subtract a personal income tax to the macroeconomic model, the 
A.
B.
C.
D.
7.  The effect of monetary policy on aggregate deman depends upon
A.
B.
C.
D.
E.
8.  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.
9.  Of the objectives of supply-side policies is to
A.
B.
C.
D.
10.  The money creation process generated by an injection of reserves stops when
A.
B.
C.
D.
11.  The near-term effect of an unexpected sale of bonds by the Fed is
A.
B.
C.
D.
12.  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.
13.  The Fed cannot predict the consequence of its actions with perfect accuracy because of 
A.
B.
C.
D.
14.  One reason why the cost of the S&L clean up was so expensive is that 
A.
B.
C.
15.  To eliminate an recessionary gap, the expenditure schedule should
A.
B.
C.
D.
16.  The early goldsmiths issues money in the form of 
A.
B.
C.
D.
17.  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.
18.  A decrease in social security payments to retired persons has what effeect on equilibrium income?
A.
B.
C.
D.
19.  Government transfer payments
A.
B.
C.
D.
20.  If the public begins to hold more cash in wallets and elsewhere, the money supply will 
A.
B.
C.
21.  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.
22.  Barter is a system of
A.
B.
C.
D.
23.  Disposable income is the income actually available to the customers that determines aggregate demand
24.  The quantity of money demanded varies
A.
B.
C.
D.
25.  Fiscal policy is designed for
A.
B.
C.
D.
26.  Government regulations to unsure the safety of depositors and to control the nation's money supply include
A.
B.
C.
D.
27.  One problem for economic stability is that in an economic upswing
A.
B.
C.
D.
E.
28.  When the fed wishes to contract the money supply it can
A.
B.
C.
D.
29.  The quantity of money demanded falls as interset rates raise because
A.
B.
C.
D.
30.  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.
31.  During a period of wide and rapid business fluctuation, a profit oriented bank will behave in a way that 
A.
B.
C.
D.
E.
32.  As a general rule, one would never keep on deposit at an FDIC insured bank an amount greated than..
A.
B.
C.
D.
33.  If the Fed wants to give banks more reserves, it can
A.
B.
C.
D.
E.
34.  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.
35.  One difference between the items in M1 and those which are added to compute M2 is that
A.
B.
C.
D.
E.
36.  When interest rates increase, banks would normally want to  
A.
B.
C.
D.
E.
37.  If the public begins to hold less cash in wallets and elsewhere, the money supply will 
A.
B.
C.
38.  To eliminate an inflationary gap, the expenditure schedule should
A.
B.
C.
D.
39.  The oversimplifies formula for the multilpier yelds a number that is too large doe to the exclusion of
A.
B.
C.
D.
40.  How does an increase in taxes affect the expenditure schedule?
A.
B.
C.
D.
41.  Which of the following is not a method to reduce the inflationary gap
A.
B.
C.
D.
42.  The supply-of-money curve has a positive slope because
A.
B.
C.
D.
E.
43.  The disctinction between M1 and M2 is based on
A.
B.
C.
D.
E.
44.  The money supply grows when 
A.
B.
C.
D.
45.  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.
46.  In contrast to changes in gov. spending, tax changes affect spending
A.
B.
C.
D.
47.  If the Fed buys a bond from a commercial bank, how will it pay for the bond?
A.
B.
C.
D.
E.
48.  Everything else equal, which of the following will raise interest rates?
A.
B.
C.
D.
E.
49.  A "conservative" would most likely argue in favor of 
A.
B.
C.
D.
50.  An automatice stabilizer is a feature of the economy that
A.
B.
C.
D.
51.  Which of the following is correct?
A.
B.
C.
D.
52.  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.
53.  Contractionary monetary policy will tend to have what effects
A.
B.
C.
D.
54.  In a 45 degree line diagram, the sensitivity of incestment spending to the interest rate is reflected in
A.
B.
C.
D.
55.  Under fractional reserve banking, when a bank lends to a customes
A.
B.
C.
D.
E.
56.  An increase in the price level will cause autonomous investment to call fecause a higher price level
A.
B.
C.
D.
57.  For any given change in taxes, the multiplier
A.
B.
C.
D.
58.  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.
59.  The willingness of profit-orientated banks to make loans
A.
B.
C.
D.
60.  Supply-side tax cuts tend to benegit the rich because tax cuts
A.
B.
C.
D.
E.
61.  The type of money in circulation in the contemporary united states is almost entirely
A.
B.
C.
D.
E.
62.  Under what conditions will the inflationary impact of expansionary monetary policy be the smallest
A.
B.
C.
D.
E.
63.  Some opponents of the federal reserve system believe that
A.
B.
C.
D.
64.  An important effect of fractional reserve banking is that bankers have
A.
B.
C.
D.
E.
65.  If banks keep only a fraction of deposits on hand, they might be vulnerable to
A.
B.
C.
D.
E.
66.  Excess reserves make a bank less vulnerable to runs, but bankers dont liek to hold exvess reserves because
A.
B.
C.
D.
67.  How does an decrease in taxes affect the expenditure schedule?
A.
B.
C.
D.
68.  When the federal reserve system was first establised, its founders intended it to 
A.
B.
C.
D.
69.  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.
70.  Money is an imperfect store of value when
A.
B.
C.
D.
E.
71.  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.
72.  Banks will hole substantial excess reserves when
A.
B.
C.
D.
73.  Credit Cards are
A.
B.
C.
D.
E.
74.  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.
75.  If congress votes to increase governemnt purchases and at the same time decrease personal income taxes, they
A.
B.
C.
D.
76.  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.
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.  If the Fed increases the discount rate, what happens to reserces and the money supply?
A.
B.
C.
D.
79.  Consequent to a secret open market operation, bon prices fell. we can deduce that the Fed probably
A.
B.
C.
D.
E.
80.  Which of the following will shift the aggregate demand curve outward?
A.
B.
C.
D.
81.  A "liberal" would most likely argue in favor of 
A.
B.
C.
D.
82.  Expansionary fiscal policy can cause a rise in real GDP in combination with
A.
B.
C.
D.
83.  Decreasing aggregate demand to eliminate and inflationary gap often creates the problem of
A.
B.
C.
D.
84.  The financial costs of the S&L bailout will be borne primarily by the 
A.
B.
C.
D.
85.  The federal reserve banks are corporations, the stockholders of which are
A.
B.
C.
D.
E.
86.  If congress votes to decrease governemnt purchases and at the same time increase personal income taxes, they
A.
B.
C.
D.
87.  Critics of the supply-side economice argue that a major flaw is
A.
B.
C.
D.
88.  Liquidity refers to 
A.
B.
C.
D.
89.  Members on the board of Governers of the Fed are
A.
B.
C.
D.
90.  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.
91.  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.
92.  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.
93.  The money supply contracts when the fed
A.
B.
C.
D.
94.  In the short run, tax cuts that are intended to increase aggregate supply have
A.
B.
C.
D.
95.  When we add a personal income tax to the macroeconomic model, the 
A.
B.
C.
D.
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