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Macroeconomics > Test 3 > Flashcards

Test 3 Flashcards

1
Q 
An increase in personal income taxes will
A) increase disposable income
B) increase investment spending
C) decrease disposable income
D) increase net exports
A

C) decrease disposable income

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2
Q

Investment spending consists of
A) money spent on factories and machinery
B) money spent on consumer goods and services
C) money spent on imports of foreign goods
D) all of the above

A

A) money spent on factories and machinery

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3
Q 
If our exports increase by less than our imports, AD will
A) increase
B) decrease
C) stay the same
D) none of the above
A

B) decrease

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4
Q

GDP measures
A) the value of all intermediate goods produced domestically within a given period
B) the value of all final goods and services produced domestically during a given period
C) the value of all final and intermediate goods and services produced domestically within a given period
D) the value of a nation’s total assets

A

B) the value of all final goods and services produced domestically during a given period

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5
Q

As the price level increases, all else being equal,
A) AD increases
B) AD decreases
C) the quantity of real gross domestic product demanded decreases
D) none of the above

A

C) the quantity of real gross domestic product demanded decreases

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6
Q

According to the real wealth effect if the price level increases
A) consumption increases
B) investment spending decreases
C) consumption decreases while the quantity of real GDP demand remains the same
D) consumption and the quantity of real GDP demanded both decrease

A

D

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7
Q

As the price level increases
A) Interest rates increase, investment spending increases and quantity of real GDP demanded decreases
B) interest rates decrease, investment spending increases and quantity of real GDP demanded decreases
C) interest rates increase, investment spending decreases and quantity of real GDP demanded decreases
D) interest rates decrease, investment spending decreases and the quantity of real GDP demanded increases

A

C) interest rates increase, investment spending decreases and quantity of real GDP demanded decreases

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8
Q 
Anything that serves as a medium of exchange is
A) gold
B) silver
C) capital
D) money
A

D) money

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9
Q 
The use of money makes it impossible to eliminate
A) prices
B) currency
C) barter
D) interest rates
A

C) barter

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10
Q 
Money is
A) defined by the US treasury
B) defined by the federal reserve system
C) anything that is accepted as a medium of exchange
D) all of the above
A

C) anything that is accepted as a medium of exchange

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11
Q 
When someone makes price comparisons among products, money is being used as
A) an expander of economic activity
B) a medium of exchange
C) a store of value
D) a unit of account
A

C) a store of value

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12
Q 
When you buy a ticket to a movie you are using money as
A) an expander of economic activity
B) a medium of exchange
C) a store of value
D) a factor of production
A

B) a medium of exchange

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13
Q 
A severe downturn in the European economy will
A) increase US exports and AD
B) decrease US exports and AD
C) increase US exports and decrease AD
D) decrease US exports and increase AD
A

B) decrease US exports and AD

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14
Q 
When you discover money in your coat pocket that you left there last winter you were using money as
A) a store of value
B) a medium of exchange
C) an expander of economic activity
D) a unit of account
A

A) a store of value

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15
Q

An increase in consumption along with a decrease in imports will result in
A) an increase in AD
B) a decrease in AD
C) AD remain the same
D) AD either increasing or decreasing depending on which change has the greater magnitude

A

B) a decrease in AD

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16
Q 
Inflation of the general price level reduces the ability of money to function as a
A) medium of exchange
B) unit of account
C) store of value
D) expander of economic activity
A

C) store of value

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17
Q

The short run aggregate supply curve
A) slopes downward bc firms find it costs less to purchase labor and other inputs when prices are lower and therefore they produce more
B) slopes downward bc firms can sell more and will therefore produce more goods when prices are lower
C) slopes upward bc firms find it costs more to purchase labor and other imports when prices are higher and therefore must produce and sell more to make a profit
D) slopes upward bc when the price level rises input prices do not rise as rapidly as output prices thus raising profit margins and increasing production and sales

A

C) slopes upward bc firms find it costs more to purchase labor and other imports when prices are higher and therefore must produce and sell more to make a profit

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18
Q

What would cause a shift in the long run aggregate supply curve
A) a change in the level of capital in the economy
B) a change in technology
C) a change in the supply of labor
D) all of the above

A

D) all of the above

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19
Q 
Inflation that results from a decrease in aggregate supply is called
A) demand pull
B) cost push
C) inflationary push
D) none of the above
A

B) cost push

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20
Q

Final goods or services used to compute GDP refer to
A) the sum of all wages paid to laborers
B) the factors of production used to produce output
C) the value of the outstanding shares of stock of manufacturing firms
D) goods and services purchased by their ultimate users

A

D) goods and services purchased by their ultimate users

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21
Q 
The total quantity of money in the economy at any one time is called the
A) total demand for money
B) GDP in nominal terms
C) money function
D) money supply
A

D) money supply

22
Q 
The ease with which an asset can be converted into money is its
A) adaptability
B) accessibility
C) liquidity
D) rigidity
A

C) liquidity

23
Q 
The two main money aggregates are
A) M2 and total debt
B) M1 and currency held in banks
C) M1 and total stock purchases
D) M1 and M2
A

D) M1 and M2

24
Q 
An institution that collects funds from lenders and distributes the funds to borrowers is
A) the federal reserve system
B) a wholesale store
C) a retail store
D) a financial intermediary
A

D) a financial intermediary

25
Q

A bank’s reserves are
A) the min value of assets it must have
B) the amount of gold it is required to have as assets against loans
C) the value of federal securities it is required to have as reserves against loans
D) assets banks can use as reserves against deposit liabilities

A

D) assets banks can use as reserves against deposit liabilities

26
Q

The law requires banks to maintain
A) fractional reserves in the form of deposit liabilities against their liquid assets
B) fractional reserves in the form of federal securities against their outstanding loans
C) fractional reserves in the form of cash in their vaults or deposits with the central bank against their deposit liabilities
D) legal reserves in the form of gold against their outstanding loans

A

C) fractional reserves in the form of cash in their vaults or deposits with the central bank against their deposit liabilities

27
Q 
The ratio of reserves to checkable deposits banks are required to maintain is called the
A) federal reserve ratio
B) legal reserve ratio
C) excess reserve ratio
D) required reserve ratio
A

D) required reserve ratio

28
Q 
Any reserves that banks hold in addition to required reserves are called
A) excess reserves
B) unrequired reserves
C) federal reserves
D) surplus reserves
A

A) excess reserves

29
Q

Consumer expenditures
A) include purchases of all final goods and services
B) increase when disposable income increases
C) are affected by changes in income tax laws
D) all of the above

A

D) all of the above

30
Q

AD includes
A) the demand for intermediate goods and services
B) all monetary and non monetary transactions
C) The demand for stocks and bonds
D) the demand for final goods and services

A

D) the demand for final goods and services

31
Q

The marginal propensity to consume (MPC) is defined as
A) the additional consumption that results from an increase in disposable income
B) the fraction of disposable income that households spend on consumption
C) the fraction of total disposable income that households save
D) the additional disposable income that households earn in a given period

A

C) the fraction of total disposable income that households save

32
Q

Expansionary fiscal policy consists of

A

A) increased government spending and increased taxes
B) decreased government spending and decreased taxes
C) decreased government spending and increased taxes
D) increased government spending and decreased taxes

33
Q 
A decrease in reserve requirements would
A) cause a recession
B) increase the money supply
C) decrease the money supply
D) decrease excess reserves
A

B) increase the money supply

34
Q 
The cost to a member bank of borrowing from the federal reserve bank is the
A) interest rate on treasury bills
B) prime rate
C) discount rate
D) yield on government bonds
A

C) discount rate

35
Q 
The tool of monetary policy  that involves the fed buying and selling government securitites is
A) moral suasion
B) open market operations
C) changes in the required reserve ratio
D) changes in the discount rate
A

B) open market operations

36
Q 
The tool of monetary policy  that involves the fed buying and selling government securities is
A) moral suasion
B) open market operations
C) changes in the required reserve ratio
D) changes in the discount rate
A

B) open market operations

37
Q 
The government's fiscal policy is its plan to regulate AD by manipulating
A) the money supply
B) taxing and spending
C) the treasury
D) the federal reserve board
A

B) taxing and spending

38
Q 
The payment made for the use of money is the
A) price of money
B) interest rate
C) face value of money
D) maturity of money
A

B) interest rate

39
Q 
When people hold money in order to make anticipated purchases of goods and services they are exercising the \_\_\_\_\_ demand for money
A) speculative
B) exchange
C) transactions
D) precautionary
A

A) speculative

40
Q 
Money held for contingencies is the \_\_\_\_\_  demand for money
A) speculative
B) exchange
C) transactions
D) precautionary
A

D) precautionary

41
Q 
The \_\_\_\_ demand for money consists of holding money in expectation that bond and stock prices will decline in the near future
A) speculative
B) exchange
C) transactions
D) precautionary
A

A) speculative

42
Q 
The quantity of money demanded at each interest rate everything else kept unchanged may be graphically depicted as the
A) demand curve for money
B) demand curve for bonds
C) expectations curve for money
D) transfer cost curve
A

A) demand curve for money

43
Q

The supply curve for money shows all other things unchanged, the
A) quantity of money supplied at each price of bonds
B) quantity of money supplied at each bond quantity
C) quantity of money supplied at each interest rate
D) amount of money people supply at a specific interest rate

A

B) quantity of money supplied at each bond quantity

44
Q

money market equilibrium occurs at the interest rate at which the
A) quantity of money demanded is equal to the quantity of money supplied
B) quantity of money demanded is less than the quantity of money supplied
C) quantity of money demanded is greater than the quantity of money supplied
D) slopes of the demand curve for money and the supply curve for money are equal

A

A) quantity of money demanded is equal to the quantity of money supplied

45
Q

4 functions of money

A

medium of exchange
store of value
unit of account
means of deferred payment

46
Q

4 components of aggregate demand

A 
C + I + G + NE
consumption
investment
government spending
net exports
47
Q

3 types of lags affecting government policy

A

recognition
implementation
effectiveness

48
Q

equation of exchange

A 
MV=PQ
M= money supply
V= velocity of money (how often money changes hands)
P= price level
Q= real GDP
49
Q

3 types of demand for money

A

transaction
precautionary
asset

50
Q

3 types of intermediation provided by banks

A

size
time
risk

51
Q

list the 3 major tools of the federal reserve board

A

open market operations
the reserve requirement
the discount rate

Macroeconomics (4 decks)

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