Exam 4

Question 1

Checks are cleared between private banks by

Answer 1

the 12 regional Federal Reserve banks

Question 2

The money multiplier

Answer 2

is the reciprocal of the required reserve ratio

Question 3

The policy lever most commonly used by the Fed is

Answer 3

buying and selling bonds

Question 4

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

Answer 4

the 12 regional Federal Reserve banks

Question 5

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

Answer 5

open-market operations

Question 6

Which of the following is a tool of monetary policy?

Answer 6

All of these choices are correct

Question 7

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

Answer 7

decreased; stimulate

Question 8

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

Answer 8

the chairman of the Federal Reserve

Question 9

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

Answer 9

monetary policy

Question 10

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

Answer 10

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

Question 11

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

Answer 11

federal funds rate

Question 12

The 12 regional Fed banks do all of the following except

Answer 12

lend money to individuals

Question 13

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

Answer 13

the income tax rate

Question 14

The discount rate is the interest rate charged by

Answer 14

the Federal Reserve when it lends money to private banks

Question 15

Which of the following is not true about excess reserves?

Answer 15

They are equal to the required reserve ratio times transactions deposits

Question 16

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

Answer 16

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

Question 17

Required reserves

Answer 17

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

Question 18

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

Answer 18

can cause abrupt changes in the money supply

Question 19

When the Fed ________ bonds, the money supply _________

Answer 19

buys; increases

Question 20

Monetary policy involves the use of money and credit controls to

Answer 20

shift the aggregate demand curve

Question 21

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

Answer 21

the Federal Reserve system

Question 22

U.S. monetary policy relies on the

Answer 22

Federal Reserve System’s control over the money supply

Question 23

The Federal Reserve Board of Governors has

Answer 23

seven members appointed by the president of the United States

Question 24

Monetary policy

Answer 24

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

Question 25

Under Alan Greenspan, the Fed

Answer 25

used a mix of money supply and interest rate adjustments

Question 26

Which of the following is not true currently?

Answer 26

The United States has an overall trade surplus

Question 27

The trade balance is found by calculating

Answer 27

the difference between exports and imports

Question 28

Exports

Answer 28

are goods and services sold to foreign buyers

Question 29

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

Answer 29

U.S. cotton growers

Question 30

Goods and services purchased by Americans from foreign sources

Answer 30

are classified as imports

Question 31

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

Answer 31

has an absolute advantage in producing the good

Question 32

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

Answer 32

a trade surplus

Question 33

Comparative advantage refers to a country's

Answer 33

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

Question 34

A tax imposed on imported goods is a

Answer 34

tariff

Question 35

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

Answer 35

absolute advantage

Question 36

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

Answer 36

a comparative advantage in producing the good

Question 37

Which of the following does the United States export?

Answer 37

computers, corn, wheat, lumber, and automobiles

Question 38

If a country has a trade deficit, it

Answer 38

imports more than it exports

Question 39

Trade restrictions provide

Answer 39

protection for import-competing industries

Question 40

Which of the following is a gain from trade?

Answer 40

a higher standard of living for all trading countries

Question 41

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

Answer 41

equal to its domestic production possibilities

Question 42

U.S. exports

Answer 42

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

Question 43

As trade restrictions are eliminated, increased imports

Answer 43

redistribute income away from import-competing industries

Question 44

Which of the following does the United States import?

Answer 44

video-game machines, cell phones, and steel

Question 45

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

Answer 45

15

Question 46

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

Answer 46

McDonalds

Question 47

Goods and services sold to foreign sources are known as

Answer 47

exports

Question 48

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

Answer 48

15

Question 49

International trade

Answer 49

allows all countries to consume beyond their production possibilities

Question 50

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

Answer 50

spend; marginal propensity to consume

Question 51

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

Answer 51

the purchase of stock in the stock market

Question 52

Net exports for the United States are

Answer 52

negative if American exports are less than imports

Question 53

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

Answer 53

Increase government expenditures to let the multiplier work

Question 54

Which of the following is an example of fiscal stimulus?

Answer 54

an increase in government spending on new military jet fighters

Question 55

Which of these statements about fiscal policy is correct?

Answer 55

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

Question 56

Net exports in the United States are

Answer 56

included in the calculation of GDP

Question 57

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

Answer 57

Social Security checks

Question 58

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

Answer 58

fiscal stimulus

Question 59

Disposable income consists of all income

Answer 59

that remains after taxes

Question 60

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

Answer 60

consumption

Question 61

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

Answer 61

fiscal policy

Question 62

The four components of aggregate demand are

Answer 62

consumption, investment, government spending, and net exports

Question 63

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

Answer 63

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

Question 64

Fiscal stimulus is

Answer 64

an increase in government spending or a decrease in taxes

Question 65

An improvement in consumer confidence will cause

Answer 65

the aggregate demand curve to shift to the right

Question 66

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

Answer 66

payment of Social Security benefits

Question 67

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

Answer 67

consumption

Question 68

Inflation occurs when

Answer 68

aggregate demand increases faster than output

Question 69

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

Answer 69

investment

Question 70

Exports minus imports are referred to as

Answer 70

net imports

Question 71

Which of the following could cause a recession?

Answer 71

a decline aggregate demand

Question 72

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

Answer 72

increasing government spending by an amount less than the GDP gap

Question 73

A tax cut is likely to cause

Answer 73

an increase in consumer spending

Question 74

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

Answer 74

multiplier process