Test3

Question 1

Factors to shift planned investment function

Answer 1

Change in technology, change in expectations about future

Question 2

Fiscal Policy

Answer 2

The federal government policies regarding government purchases (G) and taxes(T)

Question 3

Two types of fiscal policy

Answer 3

Discretionary and Automatic

Question 4

Discretionary Fiscal Policy

Answer 4

When government purposely changes G or T…Congress passes law

Question 5

Automatic Fiscal Policy

Answer 5

Does not require any government action. Built in

Question 6

Ricardian Equivalence

Answer 6

When G goes up by borrowing money, the people understand that means it substitutes future races for this year taxes

Question 7

Supply side view of fiscal policy

Answer 7

Changes in tax rates will change supply of goods and services not demand

Question 8

Suggestions for reducing federal deficit

Answer 8

Raise taxes, tax the rich, reduce expenditures

Question 9

Laffer Curve

Answer 9

At first revenue goes up for the government, but at a point it goes down

Question 10

Deficit

Answer 10

Amount by which government spending exceeds tax revenue collected for that year

Question 11

National Debt

Answer 11

The total amount of money the federal government owes. All deficits added up

Question 12

Gross Public Debt

Answer 12

All federal government debt regardless of who owns it

Question 13

Net Public Debt

Answer 13

Gross public debt minus the debt owned by federal government agencies

Question 14

Budget Philospohies

Answer 14

Annually Balanced budget, cyclically balanced budget, functional finance

Question 15

Annually Balanced Budget

Answer 15

Fed. Gov. budget balanced every year

Question 16

Cyclically Balanced Budget

Answer 16

Budget should be balanced every 5 or 10 years

Question 17

Functional Finance

Answer 17

Doesn’t matter if budget is balanced. What is important is that congress pursue any policy to maintain full employment

Question 18

Functions of Money

Answer 18

Medium of Exchange, Store of Value, Unit of Account

Question 19

Medium of Exchange

Answer 19

You can use money to buy things

Question 20

Store of Value

Answer 20

Can store ones wealth in money

Question 21

Unit of Account

Answer 21

You can use money to compare the values of different things

Question 22

M1 Measure

Answer 22

Currency of circulation, travelers checks, “demand deposits”

Question 23

m2 measure of money

Answer 23

Savings at banks, time deposits at banks, money market mutual funds

Question 24

Liquid asset

Answer 24

Easy to convert to money

Question 25

Illiquid asset

Answer 25

Hard to convert to money

Question 26

Double Coincidence of wants

Answer 26

Money fixes this

Question 27

Fiduciary money

Answer 27

There nothing physical backing up our currency. We can’t get anything for dollar bills

Question 28

People accept money because

Answer 28

Fed. gov. says they are legal tender and people think money will hold value

Question 29

Multiplier Formula

Answer 29

1/1-MPC

Question 30

Important

Answer 30

As you slide across the AE line, the price is fixed