Macroeconomics

40 Questions | Total Attempts: 309

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Macroeconomics Quizzes & Trivia

Questions and Answers
  • 1. 
    Discretionary fiscal policy is
    • A. 

      The use of interest rate changes to affect aggregate demand.

    • B. 

      The use of interest rate changes to affect aggregate supply.

    • C. 

      The use of government spending or tax policy to manage aggregate demand.

    • D. 

      The use of government spending or tax policy to manage aggregate supply.

  • 2. 
    The largest categories of government purchases of goods and services are
    • A. 

      National defense and education

    • B. 

      Scientific research and foreign aid.

    • C. 

      Border patrol and interstate highway maintenance.

    • D. 

      Law enforcement and environmental protection.

  • 3. 
    When the government makes a payment to an individual for which no good or service is provided in return, this is referred to as a
    • A. 

      Public exchange.

    • B. 

      Private exchange.

    • C. 

      Reverse tax.

    • D. 

      Transfer payment.

  • 4. 
    Social Security, Medicare, and Medicaid are the three main
    • A. 

      Tools of discretionary fiscal policy.

    • B. 

      Social insurance programs.

    • C. 

      Sources of aggregate demand.

    • D. 

      Sources of disposable income.

  • 5. 
    Disposable income
    • A. 

      Is the amount of household income collected as tax revenue.

    • B. 

      Is the total income households have available to spend.

    • C. 

      Is the portion of household income saved.

    • D. 

      Is the portion of household income invested.

  • 6. 
    A recessionary gap occurs when
    • A. 

      Aggregate output falls below potential output.

    • B. 

      Potential output falls below aggregate output.

    • C. 

      Transfer payments undermine incentives to work.

    • D. 

      Taxes on corporate profits undermine incentives to invest.

  • 7. 
    To address a recessionary gap, the appropriate fiscal policy would be
    • A. 

      An increase in personal taxes.

    • B. 

      An increase in corporate taxes.

    • C. 

      An increase in government spending.

    • D. 

      An increase in interest rates.

  • 8. 
    The effect of expansionary fiscal policy is to
    • A. 

      Shift aggregate supply to the left.

    • B. 

      Shift aggregate supply to the right.

    • C. 

      Shift aggregate demand to the left.

    • D. 

      Shift aggregate demand to the right.

  • 9. 
    Which of the following is NOT an example of contractionary fiscal policy?
    • A. 

      Decreasing the money supply

    • B. 

      Decreasing government spending

    • C. 

      Decreasing transfer payments

    • D. 

      Increasing taxes

  • 10. 
    Which of the following would shift aggregate demand to the left?
    • A. 

      An increase in government transfer payments that affects disposable income

    • B. 

      A decrease in taxes that affects disposable income

    • C. 

      An increase in taxes that affects disposable income

    • D. 

      An increase in private investment spending, funded by tax cuts

  • 11. 
    Lags that arise in the implementation of fiscal policy mean that
    • A. 

      Expansionary fiscal policy will actually shift aggregate demand to the left, rather than to the right.

    • B. 

      Expansionary fiscal policy will actually shift aggregate supply, rather than aggregate demand.

    • C. 

      Increases in government spending will actually have a contractionary effect.

    • D. 

      It can actually be destabilizing.

  • 12. 
    The expansionary fiscal policy in Japan in the 1990s has
    • A. 

      Increased the government debt.

    • B. 

      Caused interest rates to fall to 0%.

    • C. 

      Shifted aggregate demand to the left.

    • D. 

      Produced a full economic recovery.

  • 13. 
    The 2008 stimulus package was an example of
    • A. 

      Shifting aggregate demand to the left.

    • B. 

      Shifting short-run aggregate supply to the right.

    • C. 

      Contractionary fiscal policy.

    • D. 

      Expansionary fiscal policy.

  • 14. 
    The amount of the aggregate demand shift in response to an increase in government spending depends on
    • A. 

      The slope of the short-run aggregate supply curve.

    • B. 

      The slope of the long-run aggregate supply curve.

    • C. 

      The size of the multiplier.

    • D. 

      Whether the increase in government spending is supported by both political parties.

  • 15. 
    A $75 billion tax cut will
    • A. 

      Increase GDP by the same amount as a $75 billion increase in government purchases of goods and services.

    • B. 

      Increase GDP by a smaller amount than would a $75 billion increase in government purchases of goods and services.

    • C. 

      Not affect aggregate demand, as it will only shift aggregate supply.

    • D. 

      Increase the marginal propensity to consume, thereby decreasing the value of the multiplier.

  • 16. 
    Because transfer payments rise when the economy is contracting and fall when it is expanding, they are referred to as
    • A. 

      Automatic stabilizers.

    • B. 

      Discretionary policy measures.

    • C. 

      Fiscal lags.

    • D. 

      Zero-balance accounts.

  • 17. 
    Which of the following statements is true?
    • A. 

      The presence of a budget deficit is proof that government is trying to expand aggregate demand.

    • B. 

      Tax cuts will not boost aggregate demand unless the money is saved by consumers and then invested by businesses.

    • C. 

      Because transfer payments typically rise during an economic recovery, they destabilize the economy.

    • D. 

      An increase in government spending will have a greater effect on aggregate demand when the marginal propensity to consume is greater.

  • 18. 
    The government budget deficit is most likely to rise when
    • A. 

      The interest rate falls.

    • B. 

      The interest rate rises.

    • C. 

      The unemployment rate rises.

    • D. 

      The economy recovers from a recession.

  • 19. 
    A requirement to have an annually balanced federal budget would mean
    • A. 

      That there would be no more recessionary gaps or inflationary gaps.

    • B. 

      That the role of taxes and transfers as automatic stabilizers would be undermined.

    • C. 

      That total household disposable income would be the same every year.

    • D. 

      That actual GDP would equal potential GDP every year.

  • 20. 
    The implicit liabilities of the U.S. government
    • A. 

      Cannot continually be honored as they are designed, given demographic trends.

    • B. 

      Are a problem in the short run, but not in the long run.

    • C. 

      Are not a cause for worry unless they lead to crowding out.

    • D. 

      Are designed to offset an inflationary gap when it arises.

  • 21. 
    The money supply is
    • A. 

      The total value of financial assets that can be used to purchase goods and services.

    • B. 

      The total value of the nation's store of gold.

    • C. 

      The total value of stock market holdings.

    • D. 

      The annual sum of gains from trade.

  • 22. 
    Which of the following statements is FALSE?
    • A. 

      Money plays a crucial role in generating gains from trade, because it makes indirect exchange possible.

    • B. 

      In a barter economy, trade can only take place when there is a double coincidence of wants.

    • C. 

      U.S. dollars are used as money only within U.S. borders.

    • D. 

      An asset is liquid if it can easily be converted into cash.

  • 23. 
    Which of the following is NOT a role played by money?
    • A. 

      A medium of exchange

    • B. 

      A store of value

    • C. 

      A unit of account

    • D. 

      A means to increase purchasing power

  • 24. 
    Which of the following is NOT commodity money?
    • A. 

      Cigarettes

    • B. 

      A gold coin

    • C. 

      A silver coin

    • D. 

      A $5 bill in U.S. currency

  • 25. 
    The value of fiat money arises from
    • A. 

      Its usefulness as a commodity.

    • B. 

      Its ability to be redeemed in precious metals.

    • C. 

      Its historical reputation as a currency that maintains its value in international markets.

    • D. 

      Its official status as a means of exchange.

  • 26. 
    Which of the following transactions would leave M2 unchanged but increase M1?
    • A. 

      Transferring funds from your checking account to your savings account

    • B. 

      Transferring funds from your savings account to your checking account

    • C. 

      Writing a check to a locksmith, who then deposits it in her checking account

    • D. 

      Writing a check to a locksmith, who then deposits it in her savings account

  • 27. 
    M1 includes those assets that are
    • A. 

      Directly usable as a medium of exchange.

    • B. 

      Good as a store of value, but not useful as a medium of exchange.

    • C. 

      Not liquid enough to be included in M2.

    • D. 

      Near-monies.

  • 28. 
    Federal deposit insurance serves to
    • A. 

      Protect the dollar from inflation.

    • B. 

      Prevent bank runs.

    • C. 

      Preserve the value of the dollar in terms of gold.

    • D. 

      Eliminate the need for banks to satisfy capital requirements.

  • 29. 
    The size of the U.S. money supply
    • A. 

      Is determined by the Internal Revenue Service.

    • B. 

      Is determined by the amount of gold held within U.S. borders

    • C. 

      Is determined by the willingness of other countries to supply the United States with gold.

    • D. 

      Is determined jointly by the federal government and the banking system.

  • 30. 
    When you deposit $100 cash in your checking account,
    • A. 

      M1 increases and M2 decreases.

    • B. 

      M1 increases and M2 remains unchanged.

    • C. 

      Both M1 and M2 remain unchanged.

    • D. 

      M2 increases and M1 remains unchanged.

  • 31. 
    Which of the following transactions would decrease M1 and leave M2 unchanged?
    • A. 

      Depositing $100 cash in your checking account

    • B. 

      Depositing $100 cash in your savings account

    • C. 

      Writing a $75 check to a plumber who deposits it in his checking account.

    • D. 

      Withdrawing $500 in cash from your savings account

  • 32. 
    The money supply expands when
    • A. 

      You cash a paycheck.

    • B. 

      You deposit your paycheck into your checking account.

    • C. 

      You deposit your paycheck into your savings account.

    • D. 

      Banks make loans against the excess reserves they hold.

  • 33. 
    The monetary base is
    • A. 

      The sum of currency in circulation and bank reserves.

    • B. 

      Equal to M1.

    • C. 

      Equal to M2.

    • D. 

      The amount of currency held in bank vaults.

  • 34. 
    Which of the following items is a component of the monetary base but is not part of the money supply?
    • A. 

      Deposits held in checking accounts

    • B. 

      Currency in circulation

    • C. 

      Bank reserves

    • D. 

      Near-monies

  • 35. 
    Which of the following is part of both the monetary base and the money supply?
    • A. 

      Near-monies

    • B. 

      Currency in circulation

    • C. 

      Savings deposits

    • D. 

      Checkable bank deposits

  • 36. 
    The money multiplier is the ratio of
    • A. 

      The money supply to the monetary base.

    • B. 

      Bank deposits to currency in circulation.

    • C. 

      Bank reserves to bank deposits.

    • D. 

      M2 to M1.

  • 37. 
    How many regional Federal Reserve Banks are there?
    • A. 

      5

    • B. 

      6

    • C. 

      10

    • D. 

      12

  • 38. 
    Open market operations are carried out by the Federal Reserve Bank of New York as a means of
    • A. 

      Conducting monetary policy.

    • B. 

      Helping banks become profitable.

    • C. 

      Helping consumers acquire loans more easily.

    • D. 

      Reducing the amount of U.S. currency held overseas.

  • 39. 
    When the Federal Reserve purchases Treasury bills on the open market,
    • A. 

      The monetary base decreases, forcing the money supply to contract.

    • B. 

      The monetary base decreases, allowing the money supply to expand.

    • C. 

      The monetary base increases, forcing the money supply to contract.

    • D. 

      The monetary base increases, allowing the money supply to expand.

  • 40. 
    What type of action might the Federal Open Market Committee take in order to meet the goal of contracting the money supply?
    • A. 

      Lowering the reserve requirement for banks

    • B. 

      Lowering the discount rate

    • C. 

      Selling Treasury bills on the open market

    • D. 

      Making it easier for banks to acquire deposit insurance