econ Flashcards
Fiat Money
Has No intrinsic value
On a bank’s T account which is part of a bank’s asset
reserves but no deposits made by its customers
If the federal funds rate were below the level the federal reserve had targeted the fed could move back towards its target by
selling bonds this selling would reduce reserves
Things that Shift Money Supplied
Open Market Operations, Discount Rate, Federal Funds Rate, Reserve Requirement
As the price level rises the value of money
decreases so people must hold more money to purchase goods and services.
According to the classical dichotomy which of the following is influenced by monetary factors
nominal interest rates
If when the money supply changes real output and velocity do no change then a 2 percent increase in the money supplied
increases the price level by 2 percent
When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level there is an
excess supply of money, so the price level will rise
Wealth is redistributed from debtors to creditors when inflation is
unexpectedly low
Which of the following does purchasing power parity imply
The purchasing power of the dollar is the same in the US as it is in other foreign countries
as the price level falls
people will want to hold less money so the interest rate falls
as the price level rises the exchange rate
rises, so exports fall and imports rise
tax cuts shift aggregate demand
right as do increases in government spending
the long run aggregate supply curve shifts right if
technology improves
the sticky wage theory of the short run aggregate supply curve says that when the price level rises more than expected
production is more profitable and employment rises
other thins the same if the price level rises by 2% and people were expecting it to rise by 5% then some firms have
higher than desired prices, which depresses their sales
an increase in the expected price level shifts the
short run but not the long run aggregate supply curve left
Suppose the economy is in long run equilibrium in a short span of time there is a sharp rise in the stock market an increase in government purchases, an increases in the money supply and a decline in the value of the dollar in the short run
the price level and real GDP will both rise
fo the US economy which of the following is the most important reason for the downward slope of the aggregate demand curve
the interest rate effect
using the liquidity preference model when the federal reserve decreases the money supply
the equilibrium interest rate increases
according to liquidity preference theory if the price level decreases then
the interest rate falls because money demand shifts left
suppose that the federal reserve is concerned about the effects of falling stock prices on the economy. What would it do
buy bonds to lower the interest rate
the term crowding-out effect refers to
the reduction in aggregate demand that results when a fiscal expansion cause the interest rate to increase
during periods of expansion, automatic stabilizers cause government expenditures
to fall and taxes to rides
