Economics Final Flashcards
The last U.S. president to be in office when the government had a budget surplus was…
Bill Clinton.
When tax revenues exceed the government’s outlays, the budget
has a surplus and the national debt is decreasing.
What two parts of the government determine the federal budget?
Congress and the President
Since 2000, the U.S. government has generally had a government budget ________ and so the national debt has ________.
deficit; increased
An example of automatic fiscal policy is
expenditure for unemployment benefits increasing as economic growth slows.
Needs-tested spending is defined as
spending on programs for people qualified to receive benefits.
In a recession, needs-tested spending ________ and induced taxes ________.
increases; decrease
Discretionary fiscal policy is a fiscal policy action, such as
a tax cut, initiated by an act of Congress.
If government expenditure on goods and services increase by $10 billion, then aggregate demand
increases by $10 billion multiplied by the government expenditure multiplier.
If the government reduces expenditure on goods and services by $30 billion, then aggregate demand
decreases by more than $30 billion and real GDP decreases.
If a change in the tax laws leads to a $100 billion decrease in tax revenue, then aggregate demand
increases by more than $100 billion.
The government expenditure multiplier and the tax multiplier are
different in size and the government expenditure multiplier is larger.
The law-making time lag is best described as the time that it takes
Congress to pass laws needed to change taxes or spending.
If there is a rise in the price level, there is ________ in the quantity of real GDP supplied and a movement ________ along the AS curve
an increase; upward
If there is an increase in expected future income, then…
the aggregate demand curve shifts rightward.
A tax cut ________ aggregate demand and ________.
increases; shifts the AD curve rightward
Raising Interest Rates does what to aggregate demand?
Decreases aggregate demand
If real GDP is less than potential GDP, then the ________ and the price level ________.
aggregate supply curve shifts rightward; falls
Demand pull inflation can be started by
an increase in government expenditure. Because this increase causes a decrease in aggregate supply.
Cost-push inflation can start with
A decrease in aggregate supply
The only factor that can sustain inflation
Growth in the quantity of money
When cost-push inflation starts, real GDP ________ and the unemployment rate ________.
decreases; rises
M1 includes…
currency plus traveler’s checks plus checkable deposits.
If Rob deposits $300 in currency into his savings account at Bank of America,
M1 decreases.
If the Fed increases the discount rate…
commercial banks pay a higher interest rate if they borrow from the Fed.
If the Fed increases the discount rate…
commercial banks pay a higher interest rate if they borrow from the Fed.
An open market purchase of securities by the Fed leads to all of the following
- An increase in bank lending
- An initial increase in excess reserves
- An increase in banks reserves
- An increase in the monetary base
If the Fed makes an open market purchase of $1 million of government securities, the monetary base
is increased by $1 million.
When the Fed buys securities from the public, banks’ reserves ________ and the quantity of money ________.
increase; increases
The Fed sells $300 million U.S. government securities to commercial banks. This action leads to ________ in Fed assets and ________ in Fed liabilities.
a $300 million decrease; a $300 million decrease in
If the money multiplier is 3.0, a $1,000 increase in the monetary base
increases quantity of money by $3,000.
Suppose the currency drain ratio is 33 percent and the desired reserve ratio is 10 percent. The money multiplier equals
3.09.
Suppose the currency drain ratio is 33 percent and the desired reserve ratio is 10 percent. The money multiplier equals
3.09.
