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Microeconomics > Exam 4 > Flashcards

Exam 4 Flashcards

chapters: 12, 14, 16

1
Q

Checks are cleared between private banks by

A

the 12 regional Federal Reserve banks

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2
Q

The money multiplier

A

is the reciprocal of the required reserve ratio

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3
Q

The policy lever most commonly used by the Fed is

A

buying and selling bonds

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4
Q

Which of the following serves as the central banker for private banks in the United States?

A

the 12 regional Federal Reserve banks

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5
Q

The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as

A

open-market operations

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6
Q

Which of the following is a tool of monetary policy?

A

All of these choices are correct

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7
Q

In 2008, the Fed _________ the discount rate in order to _________ the economy

A

decreased; stimulate

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8
Q

Which of the following is often described as the most powerful person in the U.S. economy?

A

the chairman of the Federal Reserve

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9
Q

The use of money and credit controls to change macroeconomic activity is known as

A

monetary policy

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10
Q

Fed purchases of bonds from the public, called open-market operations

A

tend to increase reserves in the system leading to reductions in interest rates

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11
Q

The rate of interest banks charge each other for lending reserves is the

A

federal funds rate

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12
Q

The 12 regional Fed banks do all of the following except

A

lend money to individuals

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13
Q

Which of the following is not a basic monetary policy tool used by the Fed?

A

the income tax rate

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14
Q

The discount rate is the interest rate charged by

A

the Federal Reserve when it lends money to private banks

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15
Q

Which of the following is not true about excess reserves?

A

They are equal to the required reserve ratio times transactions deposits

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16
Q

Members of the Federal Reserve Board of Governors are appointed for one 14-year term so that they

A

make their decisions based on economic, rather than political, considerations

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17
Q

Required reserves

A

are the minimum amount of reserves a bank is required to hold

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18
Q

A change in the reserve requirement is the tool used least often by the Fed because it

A

can cause abrupt changes in the money supply

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19
Q

When the Fed ________ bonds, the money supply _________

A

buys; increases

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20
Q

Monetary policy involves the use of money and credit controls to

A

shift the aggregate demand curve

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21
Q

Which of the following is responsible for providing currency and cash to banks?

A

the Federal Reserve system

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22
Q

U.S. monetary policy relies on the

A

Federal Reserve System’s control over the money supply

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23
Q

The Federal Reserve Board of Governors has

A

seven members appointed by the president of the United States

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24
Q

Monetary policy

A

is the use of money and credit controls to influence macroeconomic activity

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25
Q

Under Alan Greenspan, the Fed

A

used a mix of money supply and interest rate adjustments

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26
Q

Which of the following is not true currently?

A

The United States has an overall trade surplus

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27
Q

The trade balance is found by calculating

A

the difference between exports and imports

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28
Q

Exports

A

are goods and services sold to foreign buyers

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29
Q

Which group does not benefit from trade when the United States imports cotton?

A

U.S. cotton growers

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30
Q

Goods and services purchased by Americans from foreign sources

A

are classified as imports

31
Q

When Country A can produce a good using fewer absolute inputs than any other country, then Country A

A

has an absolute advantage in producing the good

32
Q

Over a given period of time, if exports exceed imports, the result is

A

a trade surplus

33
Q

Comparative advantage refers to a country’s

A

ability to produce a specific good at a lower opportunity cost than another country

34
Q

A tax imposed on imported goods is a

A

tariff

35
Q

The ability of a country to produce a good with fewer resources than another country is called

A

absolute advantage

36
Q

If a country has a lower opportunity cost in producing a good than its trading partners, then it has

A

a comparative advantage in producing the good

37
Q

Which of the following does the United States export?

A

computers, corn, wheat, lumber, and automobiles

38
Q

If a country has a trade deficit, it

A

imports more than it exports

39
Q

Trade restrictions provide

A

protection for import-competing industries

40
Q

Which of the following is a gain from trade?

A

a higher standard of living for all trading countries

41
Q

In the absence of trade, a country’s consumption possibilities are

A

equal to its domestic production possibilities

42
Q

U.S. exports

A

constitute a relatively low share of GDP compared to most other nations

43
Q

As trade restrictions are eliminated, increased imports

A

redistribute income away from import-competing industries

44
Q

Which of the following does the United States import?

A

video-game machines, cell phones, and steel

45
Q

Imports account for approximately _________ percent of U.S. GDP

A

15

46
Q

All of the following companies export over one-quarter of their production except

A

McDonalds

47
Q

Goods and services sold to foreign sources are known as

A

exports

48
Q

Exports account for approximately _________ percent of U.S. GDP

A

15

49
Q

International trade

A

allows all countries to consume beyond their production possibilities

50
Q

When you receive this week’s paycheck, you can either spend it or save it. The fraction of each additional dollar of disposable income that you _________blank is known as your _________blank

A

spend; marginal propensity to consume

51
Q

Which of the following is not an example of investment spending?

A

the purchase of stock in the stock market

52
Q

Net exports for the United States are

A

negative if American exports are less than imports

53
Q

Which of the following is a fiscal policy prescription for ending a recession?

A

Increase government expenditures to let the multiplier work

54
Q

Which of the following is an example of fiscal stimulus?

A

an increase in government spending on new military jet fighters

55
Q

Which of these statements about fiscal policy is correct?

A

The goal of fiscal policy is to match aggregate demand with full employment potential

56
Q

Net exports in the United States are

A

included in the calculation of GDP

57
Q

All of the following represent government spending as a part of aggregate demand except

A

Social Security checks

58
Q

A tax cut or government spending increase intended to shift aggregate demand to the right is known as

A

fiscal stimulus

59
Q

Disposable income consists of all income

A

that remains after taxes

60
Q

Which of the following is the largest component of aggregate demand?

A

consumption

61
Q

Which of the following relies on government taxes and spending to change macro outcomes?

A

fiscal policy

62
Q

The four components of aggregate demand are

A

consumption, investment, government spending, and net exports

63
Q

What is the total impact on aggregate demand because of a fiscal stimulus?

A

the initial injection plus all subsequent increases in consumer spending triggered by the stimulus

64
Q

Fiscal stimulus is

A

an increase in government spending or a decrease in taxes

65
Q

An improvement in consumer confidence will cause

A

the aggregate demand curve to shift to the right

66
Q

Which of the following does not represent an example of government spending?

A

payment of Social Security benefits

67
Q

Which of the following is the largest component of aggregate demand?

A

consumption

68
Q

Inflation occurs when

A

aggregate demand increases faster than output

69
Q

Expenditures on new plant and equipment plus changes in business inventories defines

A

investment

70
Q

Exports minus imports are referred to as

A

net imports

71
Q

Which of the following could cause a recession?

A

a decline aggregate demand

72
Q

If the current level of spending falls short of full employment, the government can close the GDP gap by

A

increasing government spending by an amount less than the GDP gap

73
Q

A tax cut is likely to cause

A

an increase in consumer spending

74
Q

Suppose government spending increases, which causes producers to hire more workers. As a result, households have more income to spend, which causes aggregate demand to increase even more, this is known as the

A

multiplier process

Microeconomics (4 decks)

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