chapter 7-9 ture/false

Question 1

The Great Depression ended when world War II began

Answer 1

True

Question 2

If aggregate demand increases as a result of countercyclical fiscal policy, price will rise and GDP will fall.

Answer 2

False: both the price level and GDP will rise

Question 3

countercyclical fiscal policy aimed as closing an inflationary gap is illustrated graphically by the aggregate demand curve shifting to the left.

Answer 3

true

Question 4

both net tax revenue and government spending on good and services are functions of GDP

Answer 4

False: only tac revenue are functions of GDP government spending is regarded

Question 5

a decrease in government spending on goods and service will shift the budget line up

Answer 5

true

Question 6

a decrease in autonomous taxes would pivot the NTR line up

Answer 6

False: it produces a parallel shift down

Question 7

countercyclical fiscal policy is aimed at balancing the budget, wheres a balanced-budget fiscal policy is aimed at balancing the economy

Answer 7

False: The opposite way around

Question 8

if government spending on goods and services is increases by exactly the same amount that taxes are increases, the level of GDP will not change.

Answer 8

false: the level of GDP will still increase

Question 9

in trying to sure a recession, countercyclical fiscal policy may increase a budget deficit.

Answer 9

true

Question 10

money acts as a medium of exchange a store of wealth, and unit of account.

Answer 10

true

Question 11

individuals in society that had no medium of exchange would be forced to use barter to exchange goods

Answer 11

true

Question 12

the most important characteristic of money is that it is portable

Answer 12

False: most importantly it must be accepted

Question 13

canada’s largest commercial bank is the bank of canada

Answer 13

False: the bank of canada is not a commercial bank

Question 14

M1 is defined as currency in circulation plus notice deposits in commercial banks

Answer 14

false: it is demand deposits

Question 15

the target ratio is that portion of a banks deposit that it wishes to loan out.

Answer 15

False: it is the percentage of demand deposits that wishes to retain

Question 16

the spread is the difference between the interest rate that a bank pays to borrowers and the interest rate it charges depositor

Answer 16

False: switch the word “borrows” with “deposits”

Question 17

a bank will try to lend out all of it excess reserves

Answer 17

true

Question 18

the bank rate is the rate of interest that a bank of canada charges a commercial bank for a loan

Answer 18

true

Question 19

if some of the recipients of bank loans keep a portion of the loan in the form of cash, the money expansion process would expand

Answer 19

False: the expansion process would contract

Question 20

the transaction demand for money is determined by how much money people need

Answer 20

false: it is determined by their nominal GDP

Question 21

the Quantity of assets for money that people wish to hold increases as the rate if interest falls

Answer 21

true

Question 22

the interest rate is determined by savings and investments

Answer 22

false: is determined by the demands and supply of money

Question 23

an interest rate above equilibrium will lead to a surplus of money

Answer 23

true

Question 24

one way that the bank of canada can increase the open supply is to purchase bonds in the open market

Answer 24

true

Question 25

the biggest asset on the balance sheet of the bank of canada is notes in circulation

Answer 25

false: in circulation are a liability to the bank of canada

Question 26

contractionary monetary policy will result in a rightward shift in the AD curve

Answer 26

false: it causes the Ad to shift left

Question 27

an increase in money supply, according to Keynes, will cause investment and real GDP o increase

Answer 27

True

Question 28

the velocity of money refers to the number of times a particular product is bought and sold in the period of a year

Answer 28

False: refers to the number of times money changes hands in a year

Question 29

the Equation of exchange is: MV=PQ

Answer 29

true

Question 30

The national debt is the sum of all the federal governments past budget deficits less its surpluses.

Answer 30

True