chapter 7-9 ture/false Flashcards
The Great Depression ended when world War II began
True
If aggregate demand increases as a result of countercyclical fiscal policy, price will rise and GDP will fall.
False: both the price level and GDP will rise
countercyclical fiscal policy aimed as closing an inflationary gap is illustrated graphically by the aggregate demand curve shifting to the left.
true
both net tax revenue and government spending on good and services are functions of GDP
False: only tac revenue are functions of GDP government spending is regarded
a decrease in government spending on goods and service will shift the budget line up
true
a decrease in autonomous taxes would pivot the NTR line up
False: it produces a parallel shift down
countercyclical fiscal policy is aimed at balancing the budget, wheres a balanced-budget fiscal policy is aimed at balancing the economy
False: The opposite way around
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.
false: the level of GDP will still increase
in trying to sure a recession, countercyclical fiscal policy may increase a budget deficit.
true
money acts as a medium of exchange a store of wealth, and unit of account.
true
individuals in society that had no medium of exchange would be forced to use barter to exchange goods
true
the most important characteristic of money is that it is portable
False: most importantly it must be accepted
canada’s largest commercial bank is the bank of canada
False: the bank of canada is not a commercial bank
M1 is defined as currency in circulation plus notice deposits in commercial banks
false: it is demand deposits
the target ratio is that portion of a banks deposit that it wishes to loan out.
False: it is the percentage of demand deposits that wishes to retain
the spread is the difference between the interest rate that a bank pays to borrowers and the interest rate it charges depositor
False: switch the word “borrows” with “deposits”
a bank will try to lend out all of it excess reserves
true
the bank rate is the rate of interest that a bank of canada charges a commercial bank for a loan
true
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
False: the expansion process would contract
the transaction demand for money is determined by how much money people need
false: it is determined by their nominal GDP
the Quantity of assets for money that people wish to hold increases as the rate if interest falls
true
the interest rate is determined by savings and investments
false: is determined by the demands and supply of money
an interest rate above equilibrium will lead to a surplus of money
true
one way that the bank of canada can increase the open supply is to purchase bonds in the open market
true
the biggest asset on the balance sheet of the bank of canada is notes in circulation
false: in circulation are a liability to the bank of canada
contractionary monetary policy will result in a rightward shift in the AD curve
false: it causes the Ad to shift left
an increase in money supply, according to Keynes, will cause investment and real GDP o increase
True
the velocity of money refers to the number of times a particular product is bought and sold in the period of a year
False: refers to the number of times money changes hands in a year
the Equation of exchange is: MV=PQ
true
The national debt is the sum of all the federal governments past budget deficits less its surpluses.
True
