Unit 6 Flashcards
As commercial banks keep more excess reserves money creation…
Decreases
Why does the federal reserve alter monetary policy
To lessen the effect of natural business cycles
All of the following are characteristics of classical economics except
A significant role for government in running the economy
The federal government spends the largest amount of its budget on Social Security which is an example of
Mandatory spending
What is the major difference between an operating budget and a capital budget
Operating budget is for day-to-day expenses a capital budget is for investment spending
What affect wouldn’t increase in the discount rate have on the money supply
It would cause the money supply to contract
How many Federal Reserve districts are there
12
What leads directly to the crowding-out-effect
A big federal budget deficit
The federal budget is put together…
By Congress and the White House
All the following are constitutional limits on the power to tax except that
Exports must not be taxed
Which of these is an example of inside lag in monetary policy
Members of the board of governors disagree on the state of economy and refused to lower the discount rate several months after a recession has begun
Which of the following is one way the federal reserve bank serves the government
Selling government securities
How did the great depression relate to the school of classical economics
The Great depression appeared to disapprove the classical theory that demand and supply could return to a healthy equilibrium through MarketForce alone
The office of management and budget…
Is responsible for deciding how much money each government agency receives in the budget
Your pay stub deducts money for FICA. what does this mean
Money is being withheld to fund Social Security and Medicare
Which of the following investments is not used by the Federal Reserve to change the money supply
The federal tax code
How could the federal reserve encourage banks to lend out more of their reserves
Reduce the discount rate
All of the following are problems associated with a high national debt except that it…
Makes investing in treasury bonds notes and bills very risky
Which of the following is not tax-exempt
The convenience store on the corner
What is the major source of tax revenue for local governments
Property taxes
What is the relationship between interest rates in demand for money
As interest rates decrease demand for money increases
Why does a bank sometimes hold excess reserves
To be sure they can meet their customers demands
What will lead directly to a government shutdown
The president vetoes Congress’ appropriate goals
The national debt rose during Ronald Reagan’s term as president for all the following except
The cost of running a war
All but which of the following may be claimed as a tax deduction
Money spent on household expenses
The required reserve ratio is 10%, the money multiplier is…
10
Which of these presidents increased top marginal income tax rates during his term in office
Franklin D Roosevelt
All of the following are reasons why it is difficult to implement balance fiscal policy except
The need for discretionary spending
When you drive away from the gas pump you have just paid an
Excise tax
Who generally bears most sales tax when the demand for the good taxed is inelastic
The consumer
Which of the following situations is most likely to cause the fed to introduce a tight money supply
You called me is expanding quickly and inflation is a concern
What does lender of last resort mean with respect to the federal reserve
It will lend money to a bank in a financial emergency
Which of the following is a fundamental part of supply side economics
The government should reduce taxes to promote economic growth by increasing aggregate supply
All the phone people are well known classical economists except
Arthur Laffer
Suppose your total taxable income this year is 75,000 we are taxed at a rate of 10% on the first. 25,000 20% on the next. 25,000 and 30% on the final 25,000. What is your total income tax
15,000
What type of policy does the fed used to counteract a contraction
Easy money policy
Which statement describes the federal government fiscal policies in the 1980s
Income tax rates were reduced but spending increased
The purpose of expansionary fiscal policy is to
Increase output
Which is an example of discretionary spending
Education
Which of the following defines a means tested program
Eligibility depends on income
The Federal Reserve system consists of ______ federal reserve banks
12
What is the cost of money
The price of the in street rate
Supporters of supply-side economics believe that
Taxes have a strong negative influence on economic output
What happens to the money that your employer withhold from your paycheck
Your employer sends it to the federal government to help pay your income tax bill
What is an entitlement
Is social welfare program providing benefits to people who meet certain eligibility requirements
Suppose the required reserve ratio is 20% a $5 million deposit allows commercial banks to create as much as
$25 million
What type of policy does the federal reserve used to counteract and expansion that is causing high interest rates
Tight money policy
Which of the following is a contractionary fiscal party
The president and Congress pass a new two cent per gallon gasoline tax
Who is likely to bear the incidence of a 10% tax on cable television
The producer
When revenue exceeds expenditures
There is a budget surplus
