(Solution) If The Economy Is At Full Employment, Increases In Government Spending: Have A Multiplier Effect On Equilibrium Output. Have No Effect On The... | Snapessays.com


(Solution) If the economy is at full employment, increases in government spending: Have a multiplier effect on equilibrium output. Have no effect on the...


If the economy is at full employment, increases in government spending: Have a multiplier effect on equilibrium output. Have no effect on the aggregate price level. Are primarily absorbed by price increases. Reduce aggregate output. 2. Which of the following is NOT a leakage that reduces the size of the spending multiplier? purchases of imports personal income tax savings personal investment in human capital 3. An economy is operating at long-run equilibrium. What is the most likely result of an aggressive expansionary fiscal policy? no change in long-run GDP and employment a drop in the unemployment rate a drop in prices a rise in long-run employment 4. __________ marginal tax rates and _______________ are commonly used to increase aggregate supply. Lowering; increasing government transfer payments Lowering; offering investment tax credits Raising; increasing government transfer payments Raising; reducing government spending 5. Supply-side fiscal policies include all of the following EXCEPT: Investment in human capital. Projects that include the encouragement of new technologies. increasing transfer payments. policies that encourage investment in research and development. 6. The _____ lag can be expected to last 18 to 24 months. information recognition implementation decision 7. The concept of generational imbalance is designed to: figure out how to shift current governmental budget burdens to future generations. calculate the amount of fiscal burden future generations place on the present generation. decide the most efficient way to shift the current fiscal imbalance to future generations. estimate how much of a fiscal imbalance is shifted to future generations. 8. Yolanda took $5,000 from her checking account and put the money in her savings account at the same bank. Both M1 and M2 were reduced by $5,000. M1 went down by $5,000, but M2 was unchanged. Neither M1 nor M2 changed because the transfer was done at the same bank. M1 and M2 both rose by $5,000. 9. If the government decrees that bottle tops will be treated as money, then a bottle top: can still never be money because it has so little intrinsic value. is called fiat money. will not function well as a unit of account. will serve well for international trade. 10. If Jack Sparrow buries a chest of gold bullion on a deserted island and plans to come back later, then the gold is functioning as a: unit of account. store of value. medium of exchange. barter tool. 11. Which of the following statements is TRUE? Coins constitute 90% of currency. Paper money constitutes 90% of M1. Paper money constitutes 90% of currency. Coins constitute 90% of M1. 12. Bonds are considered to be _____ than stocks because ____. less risky; bondholders are less affected by a firm's bankruptcy riskier; stockholders earn dividends and bondholders do not less risky; bondholders earn dividends and stockholders do not riskier; stockholders are less affected by a firm's bankruptcy 13. Which is NOT a way financial institutions reduce risk? by performing credit checks on borrowers by diversifying funds by collecting information helpful for risk assessment by guaranteeing a high rate of return for all lenders 14. Which of the following is NOT involved in regulating financial markets? Federal Reserve System Federal Deposit Insurance Corporation Securities and Exchange Commission New York Stock Exchange 15. SCENARIO: Assume that the Empathy State Bank begins with the balance sheet below and is fully loaned up. Empathy State Bank Assets Liabilities Vault Cash $2,500 Deposits $100,000 Deposits at the Federal Reserve 7,500 Loans 90,000 Reference: Ref 12-1 __Vanessa has a checking account at Empathy State Bank. If she writes a check for $5,000 to pay for her new car and if the bank has a reserve requirement of 5%, this bank's excess reserves will be: $250. $5,250. 0; Empathy State Bank will be all loaned up. negative; Empathy State Bank will need to acquire $2,250 in reserves. 16. Perry deposits $10,000 in his bank account. If the reserve requirement is 15%, how much of this amount can his bank make in new loans? $10,000 $8,500 $15,000 $1,500 17. If the reserve requirement is 10%, then the potential money multiplier is ____ and the actual money multiplier is ____. 100; less than 100 10; less than 10 100; greater than 100 10; greater than 10 18. If there is a general rise in fear of the financial system: the potential multiplier will rise. the potential multiplier will fall. the actual multiplier will rise. the actual multiplier will fall. 19. Which of the following statements is CORRECT? The Fed's actions are subject to executive branch control. Politically controlled banks are better at fighting inflation than are independent central banks. The Federal Reserve is considered to be an independent central bank. The Federal Reserve System is not subject to Congressional oversight. 20. A lower reserve requirement: increases the ability of banks to make loans. further limits deposit creation. lowers the money multiplier. restricts the borrowing capability of borrowers. 21. Which of the following measures would increase the money supply? increasing the reserve requirement increasing the discount rate selling government bonds buying government bonds 22. A higher interest rate __________ consumption, investment, and _____________, which ___________ aggregate demand decreases; exports; decreases decreases; imports; decreases increases; exports; increases increases; imports; increases 23. In the long run, when the economy is at full employment, any change in money supply: leads to a change in velocity only. leads to a change in aggregate output only. leads to a change in prices. is brought about by a change in tax policy. 24. In the equation of exchange, if M = $2 trillion, P = 1.5, and Q = $8 trillion: the velocity of money (V) = 6. nominal GDP is $16 trillion. the velocity of money (V) = 4. real GDP is $12 trillion. 25. Keynesian theory: states that open market operations and an increase in the money supply lead people to buy bonds, causing bond prices to rise and interest rates to fall, and increase the investment component of aggregate demand. states that changes in the money supply have no impact on GDP in either the short or long run. is the same as the classical transmission mechanism in all essential elements. states that an increase in the money supply will lower interest rates and thereby shift the long-run aggregate supply curve to the right. 26. Milton Friedman and Anna Schwartz are most famous for: monetary theory. fiscal theory. comparative advantage theory. their tenures on the Federal Reserve Board. 27. Which economists believe the economy will always self-adjust, so that intervention is unnecessary? monetarists Keynesians classical economists Fisherites 28. What occurs during a negative demand shock? Output and price level increase. Output and price level decrease. Output increases; price level decreases. Output decreases; price level increases. 29. A financial instrument backed by a collection of mortgages is called a(n): adjustable-rate mortgage. collateralized debt obligation. credit default swap. collateralized mortgage obligation. 30. The American Recovery and Reinvestment Act, signed into law in February 2009, was designed to shift aggregate: demand rightward. demand leftward. supply rightward. supply leftward. 31. Which of the following was a change in banks' lending practices that contributed to a housing bubble? Lenders began to require borrowers to provide proof of income. Banks began to originate subprime loans they did not intend to keep. Banks developed fixed-rate mortgage loans. Banks began to rigorously check borrowers' credit quality. 32. According to the Phillips curve analysis, the way to solve inflation is to _______ unemployment or _______ increase; increase productivity increase; decrease productivity decrease; increase the money supply increase; increase the money supply 33. Statements by members of the Federal Reserve Board of Governors indicate a desire to boost economic growth by increasing the money supply. If unions form expectations rationally, then they will: wait for prices to rise before demanding higher wages. ask the Federal Reserve to hold off on changing monetary policy. immediately demand wage increases. wait and see whether the new policy works before demanding any wage increases. 34. Wages above market-clearing rates, intended to improve morale and reduce turnover, are: efficiency wages. high-cost wages. undeserved wages. profit-impediment wages. 35. “The balance of payments must balance.” This means that: a deficit in either the current or capital account must be offset by an equal surplus in the other account. income inflows must equal income outflows. imports always equal exports. net transfers equal the trade balance. 36. In recent years, China has _____ U.S. dollars to increase Chinese _____. bought; exports bought; imports sold; exports sold; imports 37. If the exchange rate is US$1.28/euro, it takes _____ to buy 1 euro and it takes _____ to buy $1. $0.78; 1.28 euros $1; 1.28 euros $1.28; 0.78 euro $1.28; 1 euro 38. A car sells for $20,000 in the United States and for 2.4 million yen in Japan. Which exchange rate is consistent with purchasing power parity? 120 yen for US$1. 1 yen for US$120. 20 yen for US$120. 1 yen for US$20. 39. The concept of purchasing power parity implies that the: Big Mac should cost about the same in all countries. Big Mac should cost more in countries that are large beef consumers, because the demand for hamburgers is greater. Big Mac is a poor value. cost of a Big Mac cannot be predicted across countries because it is only one product. 40. If the dollar depreciates relative to the yuan, then American exports to China will: increase. decrease. remain the same. fall to zero.

 


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