Q1. Compare and contrast expansionary and contractionary fiscal policy.
Monday, May 17, 2021
ECO372 Wk 3 Discussion - Government Revenue and Expenditures
Q1. Identify the main sources of revenue for and the largest expenditures made by federal, state, and local governments.
ECO372T Week 1 Apply -Output, Income, and Economic Growth SCORE 98 PERCENT
Question 1
he equation for net investment is written as:
multiple choice
Net Investment = Gross Investment - Depreciation
Net Investment = Nominal GDP - Gross Investment
Net Investment = Consumption - Gross Investment
Net Investment = Depreciation - Gross Investment
Question 2
The major difference between nominal GDP and real GDP is:
multiple choice
nominal GDP measures the value of output with constant output levels, while real GDP measures output using current-year output levels.
nominal GDP measures the value of output in constant prices, while real GDP measures output using current-year prices.
nominal GDP measures the value of output with current-year output levels, while real GDP measures output using constant output levels.
nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices.
Question 3
Which of the following correctly describes GDP using the income approach?
multiple choice
GDP = Wages + Rents + Interest + Profits and Losses
GDP = National Income + Indirect Business Taxes + Depreciation + Net Foreign Factor Income
GDP = Wages + Rents + Interest + Profits and Losses + National Income
GDP = Consumption + Gross Investment + Net Exports + Government Purchases
Question 4
Which of the following scenarios would be included in GDP?
Multiple choice
Darius unclogs the drain in his sink using the plunger he owns.
Pam buys a new 40-inch television at Walmart.
Sandra is a waitress at Morton's Steakhouse. She receives a cash tip of $50 that she pockets and does not report.
Miguel won $100 in his office fantasy football league.
Question 5
Determine whether each of the following examples would be included in Gross Domestic Product (GDP).
a. When Judy went to the grocery store yesterday, she bought three pounds of potatoes.
Judy's purchase of potatoes would be included in GDP as a consumption expenditure.
b. Ford Motor Company buys four tires to put on a new Ford Mustang.
The purchase of the tires would not be included in GDP.
c. The U.S. Air Force purchases two new fighter jets from Boeing.
The purchase of the two fighter jets would be included in GDP as a government purchase.
d. When Joey had his birthday last week, his grandmother sent him a $100 bill that he could spend.
Joey's birthday gift of $100 would not be included in GDP
Question 6
Real GDP refers to _____.
Multiple Choice
GDP data that embodies changes in the price level but not changes in physical output
the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income
GDP data that does not reflect changes in both physical output and the price level
GDP data that has been adjusted for changes in the price level
Question 7
The gross domestic product (GDP) concept accounts for society's valuation of the relative worth of goods and services by using a _____.
Multiple Choice
measure of volume
utility measure
measure of physical weight
monetary measure
Question 8
"Net foreign factor income" in the national income accounts refers to the difference between the _____.
Multiple Choice
value of products sold by Americans to other nations and the value of products bought by Americans from other nations.
income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S.
income earned by Americans in the U.S. minus the income earned by foreigners in the U.S.
value of investments that Americans made abroad and the value of investments made by foreigners in the U.S.
Question 9
Personal consumption expenditures consist of _____.
Multiple Choice
domestic investments
foreign investments in the United States
foreign plus domestic investments
household and individual purchases of services and durable and nondurable goods
Question 10
A distinguishing characteristic of public transfer payments is that they _____.
Multiple Choice
include wages to government workers
are counted as part of government purchases in the calculation of the gross domestic product
involve no contribution to current production in return for the payment
include the cost of maintaining public parks
Question 11
Answer the next question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year.
Year Units of Output Price per Unit
1 8 $2
2 10 3
3 15 4
4 18 5
5 20 6
In year 4, nominal GDP would be _____.
Multiple Choice
$316
$60
$120
$90
Question 12
GDP excludes most nonmarket transactions. Therefore, GDP tends to _____.
Multiple Choice
underestimate the rate of inflation in the economy
overestimate the rate of inflation in the economy
underestimate the amount of production in the economy
overestimate the amount of production of the economy
Question 13
In the treatment of U.S. exports and imports, national income accountants _____.
Multiple Choice
subtract exports but add imports in calculating GDP
add both exports and imports in calculating GDP
subtract both exports and imports in calculating GDP
add exports but subtract imports in calculating GDP
Question 14
GDP measured using base year prices is called _____.
Multiple Choice
nominal GDP
constant GDP
real GDP
deflated GDP
Question 15
Which of the following is not an example of an intermediate good?
Multiple Choice
gasoline bought by a trucking company
an oven bought by a homeowner
flour bought by a bakery
office supplies bought by an accounting firm
Question 16
Suppose that real GDP per capita in the United States is $49,000. If the long-term growth rate of real GDP per capita is 1.6% per year, how many years will it take for real GDP per capita to reach $98,000?
Instructions: Enter your answer as a whole number.
44 Numeric Response Edit Unavailable. 45. Years
Question 17
Suppose that Italy can produce either goods or services with its resources, and that its PPF curve is shown on the graph as PPF1.
Using the graph, for each of the following situations, determine whether the PPF curve shifts.
a. Suppose that Italy increases its spending on education, which increases the amount of human capital in Italy.
Italy's PPF curve would increase and move to PPF3.
b. A recession causes Italy's unemployment rate to increase above the natural rate of unemployment.
Italy's PPF curve would remain the same at PPF1.
c. Italy experiences an influx of immigrants from surrounding countries, which causes the population of Italy to increase.
Italy's PPF curve would increase and move to PPF3.
Question 18
The table below shows real GDP per capita for the United States between the years 1950–2016.
Real GDP per Capita over Time
Year Real GDP per Capita (dollars)
1950 $13,819
1975 24,601
2000 43,935
2016 52,172
Instructions: Round your answers to one decimal place.
a. What is the growth rate in the standard of living from 1950 to 1975?
3.1 Numeric Response 1. Edit Unavailable. 3.1 incorrect. %
b. What is the growth rate in the standard of living from 1975 to 2000?
3.1 Numeric Response 2. Edit Unavailable. 3.1 incorrect. %
c. What is the growth rate in the standard of living from 2000 to 2016?
1.2 Numeric Response 3. Edit Unavailable. 1.2 incorrect. %
ANSWER
Correct answers should be:
78.0%
78.6%
18.7%
Question 19
Providing a constant number of workers with additional capital with which to work will ______ labor productivity at a(n) ______ rate.
Multiple Choice
increase; constant
decrease; decreasing
increase; increasing
increase; decreasing
Question 20
Use the following diagram to answer the next question.
The most likely cause for a shift in the production possibilities frontier from AB to CD is
Multiple Choice
an increase in government purchase of the economy's output.
the use of the economy's resources in a less efficient way.
an increase in the quantity and quality of labor resources.
an increase in the spending of business and consumers.
Question 21
The application of new technologies to the production process will increase
Multiple Choice
labor productivity.
the quantity of human capital.
the unemployment rate.
the share of the population employed.
Question 22
The key variable in determining changes in a country's standard of living is the
Multiple Choice
interest rate.
long-run rate of economic growth.
unemployment rate.
inflation rate.
Question 23
Given the annual rate of economic growth, the "rule of 72" allows one to
Multiple Choice
determine the accompanying rate of inflation.
calculate the size of the GDP gap.
determine the growth rate of per capita GDP.
calculate the number of years required for real GDP to double.
Question 24
Before the Industrial Revolution, living standards in the world
Multiple Choice
were relatively stagnant for long periods of time.
were already rising significantly for many decades.
were declining because of rapid increases in population.
are not known, for lack of reliable records from that period.
Question 25
the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will ______ in Alpha compared to Beta, holding other factors constant.
Multiple Choice
increase output by the same amount
have no effect on output
increase output less
increase output more
Question 26
When a firm builds a new factory, this is an example of an investment in
Multiple Choice
the market.
human capital.
physical capital.
research and development.
Question 27
Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output while ______ labor productivity.
Multiple Choice
increase; decreasing
increase; not changing
increase; increasing
decrease; increasing
Question 28
To increase future living standards by pursuing higher current rates of investment spending, an economy must
Multiple Choice
reduce current rates of consumption spending.
allow higher rates of current consumption.
reduce the current capital stock.
decrease the amount of future research and development spending.
Question 29
Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This will likely cause
Multiple Choice
the U.S.'s production possibilities frontier to shift inward faster than Nepal's.
Nepal's production possibilities frontier to shift outward faster than the U.S.'s.
Nepal's production possibilities frontier to shift inward faster than the U.S.'s.
the U.S.'s production possibilities frontier to shift outward faster than Nepal's.
Question 30
Which of the following will not increase a nation's real GDP?
Multiple Choice
number of workers
average price level
technological progress
labor productivity
he equation for net investment is written as:
multiple choice
Net Investment = Gross Investment - Depreciation
Net Investment = Nominal GDP - Gross Investment
Net Investment = Consumption - Gross Investment
Net Investment = Depreciation - Gross Investment
Question 2
The major difference between nominal GDP and real GDP is:
multiple choice
nominal GDP measures the value of output with constant output levels, while real GDP measures output using current-year output levels.
nominal GDP measures the value of output in constant prices, while real GDP measures output using current-year prices.
nominal GDP measures the value of output with current-year output levels, while real GDP measures output using constant output levels.
nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices.
Question 3
Which of the following correctly describes GDP using the income approach?
multiple choice
GDP = Wages + Rents + Interest + Profits and Losses
GDP = National Income + Indirect Business Taxes + Depreciation + Net Foreign Factor Income
GDP = Wages + Rents + Interest + Profits and Losses + National Income
GDP = Consumption + Gross Investment + Net Exports + Government Purchases
Question 4
Which of the following scenarios would be included in GDP?
Multiple choice
Darius unclogs the drain in his sink using the plunger he owns.
Pam buys a new 40-inch television at Walmart.
Sandra is a waitress at Morton's Steakhouse. She receives a cash tip of $50 that she pockets and does not report.
Miguel won $100 in his office fantasy football league.
Question 5
Determine whether each of the following examples would be included in Gross Domestic Product (GDP).
a. When Judy went to the grocery store yesterday, she bought three pounds of potatoes.
Judy's purchase of potatoes would be included in GDP as a consumption expenditure.
b. Ford Motor Company buys four tires to put on a new Ford Mustang.
The purchase of the tires would not be included in GDP.
c. The U.S. Air Force purchases two new fighter jets from Boeing.
The purchase of the two fighter jets would be included in GDP as a government purchase.
d. When Joey had his birthday last week, his grandmother sent him a $100 bill that he could spend.
Joey's birthday gift of $100 would not be included in GDP
Question 6
Real GDP refers to _____.
Multiple Choice
GDP data that embodies changes in the price level but not changes in physical output
the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income
GDP data that does not reflect changes in both physical output and the price level
GDP data that has been adjusted for changes in the price level
Question 7
The gross domestic product (GDP) concept accounts for society's valuation of the relative worth of goods and services by using a _____.
Multiple Choice
measure of volume
utility measure
measure of physical weight
monetary measure
Question 8
"Net foreign factor income" in the national income accounts refers to the difference between the _____.
Multiple Choice
value of products sold by Americans to other nations and the value of products bought by Americans from other nations.
income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S.
income earned by Americans in the U.S. minus the income earned by foreigners in the U.S.
value of investments that Americans made abroad and the value of investments made by foreigners in the U.S.
Question 9
Personal consumption expenditures consist of _____.
Multiple Choice
domestic investments
foreign investments in the United States
foreign plus domestic investments
household and individual purchases of services and durable and nondurable goods
Question 10
A distinguishing characteristic of public transfer payments is that they _____.
Multiple Choice
include wages to government workers
are counted as part of government purchases in the calculation of the gross domestic product
involve no contribution to current production in return for the payment
include the cost of maintaining public parks
Question 11
Answer the next question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year.
Year Units of Output Price per Unit
1 8 $2
2 10 3
3 15 4
4 18 5
5 20 6
In year 4, nominal GDP would be _____.
Multiple Choice
$316
$60
$120
$90
Question 12
GDP excludes most nonmarket transactions. Therefore, GDP tends to _____.
Multiple Choice
underestimate the rate of inflation in the economy
overestimate the rate of inflation in the economy
underestimate the amount of production in the economy
overestimate the amount of production of the economy
Question 13
In the treatment of U.S. exports and imports, national income accountants _____.
Multiple Choice
subtract exports but add imports in calculating GDP
add both exports and imports in calculating GDP
subtract both exports and imports in calculating GDP
add exports but subtract imports in calculating GDP
Question 14
GDP measured using base year prices is called _____.
Multiple Choice
nominal GDP
constant GDP
real GDP
deflated GDP
Question 15
Which of the following is not an example of an intermediate good?
Multiple Choice
gasoline bought by a trucking company
an oven bought by a homeowner
flour bought by a bakery
office supplies bought by an accounting firm
Question 16
Suppose that real GDP per capita in the United States is $49,000. If the long-term growth rate of real GDP per capita is 1.6% per year, how many years will it take for real GDP per capita to reach $98,000?
Instructions: Enter your answer as a whole number.
44 Numeric Response Edit Unavailable. 45. Years
Question 17
Suppose that Italy can produce either goods or services with its resources, and that its PPF curve is shown on the graph as PPF1.
Using the graph, for each of the following situations, determine whether the PPF curve shifts.
a. Suppose that Italy increases its spending on education, which increases the amount of human capital in Italy.
Italy's PPF curve would increase and move to PPF3.
b. A recession causes Italy's unemployment rate to increase above the natural rate of unemployment.
Italy's PPF curve would remain the same at PPF1.
c. Italy experiences an influx of immigrants from surrounding countries, which causes the population of Italy to increase.
Italy's PPF curve would increase and move to PPF3.
Question 18
The table below shows real GDP per capita for the United States between the years 1950–2016.
Real GDP per Capita over Time
Year Real GDP per Capita (dollars)
1950 $13,819
1975 24,601
2000 43,935
2016 52,172
Instructions: Round your answers to one decimal place.
a. What is the growth rate in the standard of living from 1950 to 1975?
3.1 Numeric Response 1. Edit Unavailable. 3.1 incorrect. %
b. What is the growth rate in the standard of living from 1975 to 2000?
3.1 Numeric Response 2. Edit Unavailable. 3.1 incorrect. %
c. What is the growth rate in the standard of living from 2000 to 2016?
1.2 Numeric Response 3. Edit Unavailable. 1.2 incorrect. %
ANSWER
Correct answers should be:
78.0%
78.6%
18.7%
Question 19
Providing a constant number of workers with additional capital with which to work will ______ labor productivity at a(n) ______ rate.
Multiple Choice
increase; constant
decrease; decreasing
increase; increasing
increase; decreasing
Question 20
Use the following diagram to answer the next question.
The most likely cause for a shift in the production possibilities frontier from AB to CD is
Multiple Choice
an increase in government purchase of the economy's output.
the use of the economy's resources in a less efficient way.
an increase in the quantity and quality of labor resources.
an increase in the spending of business and consumers.
Question 21
The application of new technologies to the production process will increase
Multiple Choice
labor productivity.
the quantity of human capital.
the unemployment rate.
the share of the population employed.
Question 22
The key variable in determining changes in a country's standard of living is the
Multiple Choice
interest rate.
long-run rate of economic growth.
unemployment rate.
inflation rate.
Question 23
Given the annual rate of economic growth, the "rule of 72" allows one to
Multiple Choice
determine the accompanying rate of inflation.
calculate the size of the GDP gap.
determine the growth rate of per capita GDP.
calculate the number of years required for real GDP to double.
Question 24
Before the Industrial Revolution, living standards in the world
Multiple Choice
were relatively stagnant for long periods of time.
were already rising significantly for many decades.
were declining because of rapid increases in population.
are not known, for lack of reliable records from that period.
Question 25
the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will ______ in Alpha compared to Beta, holding other factors constant.
Multiple Choice
increase output by the same amount
have no effect on output
increase output less
increase output more
Question 26
When a firm builds a new factory, this is an example of an investment in
Multiple Choice
the market.
human capital.
physical capital.
research and development.
Question 27
Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output while ______ labor productivity.
Multiple Choice
increase; decreasing
increase; not changing
increase; increasing
decrease; increasing
Question 28
To increase future living standards by pursuing higher current rates of investment spending, an economy must
Multiple Choice
reduce current rates of consumption spending.
allow higher rates of current consumption.
reduce the current capital stock.
decrease the amount of future research and development spending.
Question 29
Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This will likely cause
Multiple Choice
the U.S.'s production possibilities frontier to shift inward faster than Nepal's.
Nepal's production possibilities frontier to shift outward faster than the U.S.'s.
Nepal's production possibilities frontier to shift inward faster than the U.S.'s.
the U.S.'s production possibilities frontier to shift outward faster than Nepal's.
Question 30
Which of the following will not increase a nation's real GDP?
Multiple Choice
number of workers
average price level
technological progress
labor productivity
ECO372T Week 4 Apply Money and the Federal Reserve SCORE 100 PERCENT
Question 1
Suppose the Federal Reserve increases the amount of reserves by $100 million and the total money supply increases by $500 million.
Instructions: Enter your answers as a whole number.
a. What is the money multiplier?
5
b. Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $50 million?
$ 250 Million
Question 2
Use the following table to determine the levels of M1 and M2 in the United States.
Money Categories in the United States
Asset Amount (billions of dollars)
Currency $82
Demand deposits 80
Money market funds 44
Other checkable deposits 37
Savings deposits 460
Small time deposits 22
Traveler's checks 4
Instructions: Enter your answers as a whole number.
a. Calculate the M1 money supply.
$203billion
b. Calculate the M2 money supply.
$729billion
Question 3
The part of the Federal Reserve that determines and implements the nation's monetary policy and controls the money supply to promote stable prices and economic growth is the:
multiple choice
12 Federal Reserve District Banks.
president of the Board of Governors.
Board of Governors.
Federal Open Market Committee.
Question 4
For each of the following scenarios, determine whether money is being used as a medium of account, store of value, or unit of account.
a. Sam gives the grocery store clerk a $5 bill to pay for his purchase.
multiple choice 1
Medium of exchange
Store of value
Unit of account
b. Bill looks at the $20 price tag on a clock to see how much money he would need to purchase it.
multiple choice 2
Medium of exchange
Store of value
Unit of account
c. Maria writes a check to pay her electric bill.
multiple choice 3
Store of value
Medium of exchange
Unit of account
d. Susan transfers some of her wealth from her checking account into a certificate of deposit that earns interest.
multiple choice 4
Unit of account
Store of value
Medium of exchange
Question 5
The Federal Reserve District Banks are divided:
multiple choice
into geographical regions with the majority of the district banks located in the eastern half of the United States.
evenly geographically to ensure the same amount of area coverage for the regions of the United States.
geographically to encompass the 12 largest metropolitan and financial areas in the United States.
into geographical regions with the same number of states located in each of the districts.
Question 6
Which of the following are liabilities to a bank?
Multiple Choice
vault cash and demand deposits
property and capital stock
demand and time deposits
capital stock and reserves
Question 7
If the reserve requirement is 20% and commercial bankers decide to hold additional excess reserves equal to 5% of any newly acquired checkable deposits, then the effective monetary multiplier for the banking system will be
Multiple Choice
4.
5.
6.
3.
Question 8
Members of the Federal Reserve Board of Governors are
Multiple Choice
selected by the Federal Open Market Committee for 4-year terms.
appointed by the president to staggered 14-year terms.
appointed by Congress to staggered 14-year terms.
selected by each of the Federal Reserve banks for 4-year terms.
Question 9
Money is "created" when
Multiple Choice
people use money to pay for stuff they buy from one another.
someone lends money to a friend or a family member.
a bank grants a loan to a customer.
a depositor deposits money at the bank.
Question 10
A checkable deposit at a commercial bank is a(n)
Multiple Choice
asset to the depositor and a liability to the bank.
liability to both the depositor and the bank.
liability to the depositor and an asset to the bank.
asset to both the depositor and the bank.
Question 11
Money eliminates the need for a coincidence of wants in trading primarily through its role as a
Multiple Choice
medium of deferred payment.
medium of exchange.
unit of account.
store of value.
Question 12
The coupon rate is the
Multiple Choice
interest rate promised when a bond is issued.
amount originally lent.
regular payment of interest to a bondholder.
maximum interest rate that can be paid on a bond.
Question 13
The reason for the Fed being set up as an independent agency of government is to
Multiple Choice
allow it to earn profits like private firms.
protect it from political pressure.
let it be able to compete with other financial institutions.
make it be managed and controlled by member banks.
Question 14
A bank's required reserves can be calculated by
Multiple Choice
multiplying its checkable-deposit liabilities by its excess reserves.
dividing its excess reserves by its required reserves.
dividing its required reserves by its excess reserves.
multiplying its checkable-deposit liabilities by the reserve ratio.
Question 15
The Federal Open Market Committee (FOMC)
Multiple Choice
monitors regulatory banking laws for member banks.
provides advice on banking stability to the Fed.
follows the actions and operations of financial markets to keep them open and competitive.
sets policy on the sale and purchase of government bonds by the Fed.
Question 16
When a consumer wants to compare the price of one product with another, money is primarily functioning as a
Multiple Choice
checkable deposit.
medium of exchange.
unit of account.
store of value.
Question 17
Which definition(s) of the money supply include(s) only items that are directly and immediately usable as a medium of exchange?
Multiple Choice
M2
M1
M1 and M2
neither M1 nor M2
Question 18
The Federal Reserve System consists of which of the following?
Multiple Choice
Federal Open Market Committee and Office of Thrift Supervision
U.S. Treasury Department and Bureau of Engraving and Printing
Board of Governors and the 12 Federal Reserve Banks
Federal Deposit Insurance Corporation and Controller of the Currency
Question 19
Assets of the commercial banking system include
Multiple Choice
reserves and deposits.
reserves and loans.
loans and deposits.
deposits.
Question 20
If the reserve requirement were 15% percent, the value of the monetary multiplier would be
Multiple Choice
7.32.
6.67.
5.50.
8.54.
Question 21
Assume that the required reserve ratio is 20%. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the reserves at Bank A and Bank B?
Multiple Choice
increase by $10,000 at Bank A and decrease by $50,000 at Bank B
Reserves stay the same in both banks.
increase by $10,000 at Bank A and decrease by $10,000 at Bank B
increase by $50,000 at Bank A and decrease by $50,000 at Bank B
Question 22
An increase in nominal GDP will
Multiple Choice
increase the transactions demand for money but decrease the total demand for money.
decrease the transactions demand for money but increase the total demand for money.
increase the transactions demand and the total demand for money.
decrease the transactions demand and the total demand for money.
Question 23
Traditionally, the Federal Reserve can give emergency loans only to
Multiple Choice
manufacturing firms.
securities firms.
investment banks.
commercial banks.
Question 24
Use the following graph to answer the next question.
Which line in the graph above would best illustrate the asset demand for money curve?
Multiple Choice
Line 3
Line 2
Line 4
Line 1
Question 25
Fractional reserve banking refers to a system where banks
Multiple Choice
grant loans to their borrowing customers.
accept a portion of their deposits in checkable accounts.
deposit a fraction of their reserves at the central bank.
hold only a fraction of their deposits in their reserves.
Question 26
What function is money serving when you deposit it in a savings account?
Multiple Choice
a checkable deposit
a medium of exchange
a store of value
a unit of account
Question 27
Which of the following items are included in money supply M2 but not M1?
Multiple Choice
savings deposits
Federal Reserve notes
checkable deposits
coins
Question 28
A wealthy executive is holding money, waiting for a good time to invest in the stock market. This action would be an example of the
Multiple Choice
asset demand for money.
transactions demand for money.
creation of fiat money.
use of money as a medium of exchange.
Question 29
The main function of the Federal Reserve System is to
Multiple Choice
clear checks from member banks.
set reserve requirements of banks.
control the money supply.
serve as the fiscal agent for the federal government.
Question 30
Cash held by a bank in its vault is a part of the bank's
Multiple Choice
liabilities.
money supply.
net worth.
reserves.
Suppose the Federal Reserve increases the amount of reserves by $100 million and the total money supply increases by $500 million.
Instructions: Enter your answers as a whole number.
a. What is the money multiplier?
5
b. Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $50 million?
$ 250 Million
Question 2
Use the following table to determine the levels of M1 and M2 in the United States.
Money Categories in the United States
Asset Amount (billions of dollars)
Currency $82
Demand deposits 80
Money market funds 44
Other checkable deposits 37
Savings deposits 460
Small time deposits 22
Traveler's checks 4
Instructions: Enter your answers as a whole number.
a. Calculate the M1 money supply.
$203billion
b. Calculate the M2 money supply.
$729billion
Question 3
The part of the Federal Reserve that determines and implements the nation's monetary policy and controls the money supply to promote stable prices and economic growth is the:
multiple choice
12 Federal Reserve District Banks.
president of the Board of Governors.
Board of Governors.
Federal Open Market Committee.
Question 4
For each of the following scenarios, determine whether money is being used as a medium of account, store of value, or unit of account.
a. Sam gives the grocery store clerk a $5 bill to pay for his purchase.
multiple choice 1
Medium of exchange
Store of value
Unit of account
b. Bill looks at the $20 price tag on a clock to see how much money he would need to purchase it.
multiple choice 2
Medium of exchange
Store of value
Unit of account
c. Maria writes a check to pay her electric bill.
multiple choice 3
Store of value
Medium of exchange
Unit of account
d. Susan transfers some of her wealth from her checking account into a certificate of deposit that earns interest.
multiple choice 4
Unit of account
Store of value
Medium of exchange
Question 5
The Federal Reserve District Banks are divided:
multiple choice
into geographical regions with the majority of the district banks located in the eastern half of the United States.
evenly geographically to ensure the same amount of area coverage for the regions of the United States.
geographically to encompass the 12 largest metropolitan and financial areas in the United States.
into geographical regions with the same number of states located in each of the districts.
Question 6
Which of the following are liabilities to a bank?
Multiple Choice
vault cash and demand deposits
property and capital stock
demand and time deposits
capital stock and reserves
Question 7
If the reserve requirement is 20% and commercial bankers decide to hold additional excess reserves equal to 5% of any newly acquired checkable deposits, then the effective monetary multiplier for the banking system will be
Multiple Choice
4.
5.
6.
3.
Question 8
Members of the Federal Reserve Board of Governors are
Multiple Choice
selected by the Federal Open Market Committee for 4-year terms.
appointed by the president to staggered 14-year terms.
appointed by Congress to staggered 14-year terms.
selected by each of the Federal Reserve banks for 4-year terms.
Question 9
Money is "created" when
Multiple Choice
people use money to pay for stuff they buy from one another.
someone lends money to a friend or a family member.
a bank grants a loan to a customer.
a depositor deposits money at the bank.
Question 10
A checkable deposit at a commercial bank is a(n)
Multiple Choice
asset to the depositor and a liability to the bank.
liability to both the depositor and the bank.
liability to the depositor and an asset to the bank.
asset to both the depositor and the bank.
Question 11
Money eliminates the need for a coincidence of wants in trading primarily through its role as a
Multiple Choice
medium of deferred payment.
medium of exchange.
unit of account.
store of value.
Question 12
The coupon rate is the
Multiple Choice
interest rate promised when a bond is issued.
amount originally lent.
regular payment of interest to a bondholder.
maximum interest rate that can be paid on a bond.
Question 13
The reason for the Fed being set up as an independent agency of government is to
Multiple Choice
allow it to earn profits like private firms.
protect it from political pressure.
let it be able to compete with other financial institutions.
make it be managed and controlled by member banks.
Question 14
A bank's required reserves can be calculated by
Multiple Choice
multiplying its checkable-deposit liabilities by its excess reserves.
dividing its excess reserves by its required reserves.
dividing its required reserves by its excess reserves.
multiplying its checkable-deposit liabilities by the reserve ratio.
Question 15
The Federal Open Market Committee (FOMC)
Multiple Choice
monitors regulatory banking laws for member banks.
provides advice on banking stability to the Fed.
follows the actions and operations of financial markets to keep them open and competitive.
sets policy on the sale and purchase of government bonds by the Fed.
Question 16
When a consumer wants to compare the price of one product with another, money is primarily functioning as a
Multiple Choice
checkable deposit.
medium of exchange.
unit of account.
store of value.
Question 17
Which definition(s) of the money supply include(s) only items that are directly and immediately usable as a medium of exchange?
Multiple Choice
M2
M1
M1 and M2
neither M1 nor M2
Question 18
The Federal Reserve System consists of which of the following?
Multiple Choice
Federal Open Market Committee and Office of Thrift Supervision
U.S. Treasury Department and Bureau of Engraving and Printing
Board of Governors and the 12 Federal Reserve Banks
Federal Deposit Insurance Corporation and Controller of the Currency
Question 19
Assets of the commercial banking system include
Multiple Choice
reserves and deposits.
reserves and loans.
loans and deposits.
deposits.
Question 20
If the reserve requirement were 15% percent, the value of the monetary multiplier would be
Multiple Choice
7.32.
6.67.
5.50.
8.54.
Question 21
Assume that the required reserve ratio is 20%. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the reserves at Bank A and Bank B?
Multiple Choice
increase by $10,000 at Bank A and decrease by $50,000 at Bank B
Reserves stay the same in both banks.
increase by $10,000 at Bank A and decrease by $10,000 at Bank B
increase by $50,000 at Bank A and decrease by $50,000 at Bank B
Question 22
An increase in nominal GDP will
Multiple Choice
increase the transactions demand for money but decrease the total demand for money.
decrease the transactions demand for money but increase the total demand for money.
increase the transactions demand and the total demand for money.
decrease the transactions demand and the total demand for money.
Question 23
Traditionally, the Federal Reserve can give emergency loans only to
Multiple Choice
manufacturing firms.
securities firms.
investment banks.
commercial banks.
Question 24
Use the following graph to answer the next question.
Which line in the graph above would best illustrate the asset demand for money curve?
Multiple Choice
Line 3
Line 2
Line 4
Line 1
Question 25
Fractional reserve banking refers to a system where banks
Multiple Choice
grant loans to their borrowing customers.
accept a portion of their deposits in checkable accounts.
deposit a fraction of their reserves at the central bank.
hold only a fraction of their deposits in their reserves.
Question 26
What function is money serving when you deposit it in a savings account?
Multiple Choice
a checkable deposit
a medium of exchange
a store of value
a unit of account
Question 27
Which of the following items are included in money supply M2 but not M1?
Multiple Choice
savings deposits
Federal Reserve notes
checkable deposits
coins
Question 28
A wealthy executive is holding money, waiting for a good time to invest in the stock market. This action would be an example of the
Multiple Choice
asset demand for money.
transactions demand for money.
creation of fiat money.
use of money as a medium of exchange.
Question 29
The main function of the Federal Reserve System is to
Multiple Choice
clear checks from member banks.
set reserve requirements of banks.
control the money supply.
serve as the fiscal agent for the federal government.
Question 30
Cash held by a bank in its vault is a part of the bank's
Multiple Choice
liabilities.
money supply.
net worth.
reserves.
ECO372T Week 3 Apply Public Finance and Aggregate Demand and Supply Homework
Question 1
Which of the following transactions best represents the government making a transfer payment to a household or business?
multiple choice
The federal government's Supplemental Nutritional Assistance Program assists low-income families with purchasing food.
The federal government's Internal Revenue Service hires extra accountants during the tax season to audit tax returns.
The state government's Office of Motor Vehicles imposes an annual licensing fee for all in-state vehicles.
The local government's Department of Parks and Recreation operates a local pool for residents in the summer.
Question 2
Which of the following descriptions is most representative of the mix of revenues and expenditures of the federal government?
multiple choice
Revenue is predominantly from property taxes but may include sales taxes or income taxes. Expenditures include investments in education and public welfare.
Revenue is predominantly from sales taxes and may include personal or corporate income taxes. Expenditures include investments in education and infrastructure.
Revenue is predominantly from income taxes and payroll taxes. Expenditures include income security and interest on the national debt.
Revenue is predominantly from excise taxes and property taxes. Expenditures include investments in infrastructure and national defense.
Question 3
How is the public debt calculated?
rev: 06_21_2018
Multiple Choice
By subtracting current government spending from current government tax revenues
By summing the annual government purchases over time
By subtracting the government's total liabilities from its total assets
By summing the annual difference between tax revenues and government spending over the years
Question 4
Which of the following is not a significant source of revenue for the U.S. federal government?
Multiple Choice
Personal income taxes
Corporate income taxes
Property taxes
Payroll taxes
Question 5
Which one of the following is not an excise tax of the federal government?
Multiple Choice
Gasoline tax
General sales tax
Correct
Alcoholic beverage tax
Tobacco tax
Question 6
A federal budget deficit exists when federal government
Multiple Choice
taxation is decreasing in a given year.
spending is increasing in a given year.
assets are less than liabilities in a given year.
spending exceeds tax revenues in a given year.
Question 7
Which of the following is the largest expenditure item of local governments?
Multiple Choice
Highways
Public safety
Welfare
Education
Question 8
A tax is regressive if it
Multiple Choice
takes a higher percentage of income as income increases.
takes the same percentage of income regardless of income level.
is levied on consumers.
takes a smaller percentage of income as income increases.
Question 9
Many states in the U.S. acquire significant amounts of funds from the following, except
Multiple Choice
property taxes.
state-run lotteries.
personal income taxes.
grants from the Federal government.
Question 10
One important reason why the United States government is not likely to go bankrupt even with a large public debt is that it has
Multiple Choice
the power to print money to finance the debt.
a strong military to protect it from creditors.
the capacity to pay off its outstanding debt with gold.
the ability to decrease interest rates and increase investment spending.
Question 11
The circular flow model with government included would show that government
Multiple Choice
obtains revenues in the product market and uses it to cover costs in the resource market.
produces goods and services and sells them in the product market to generate net taxes.
controls economic resources and sells them in the resource market.
provides goods and services to businesses and households and pays for them with net taxes.
Question 12
A public debt that is owed to foreigners can be burdensome because
Multiple Choice
the payment of interest will conflict with a nation's foreign aid programs.
the payment of interest reduces the volume of goods and services available for domestic uses.
the payment of interest will necessarily have a deflationary effect on prices in the paying nation.
foreign interest rates are persistently higher than domestic interest rates.
Question 13
Which of the following is not a government activity that is involved in public finance?
Multiple Choice
Running government-owned enterprises such as hospitals, utilities, and lotteries.
Regulating the activities of firms in the financial sector of the economy.
Providing public goods and services such as national defense and education.
Redistributing income through various taxes and income-transfer payments.
Question 14
The Social Security tax is regressive because
Multiple Choice
the Social Security tax rate applied does not rise with the salary level.
each individual must pay a set percentage of his or her income in Social Security taxes.
as income increases, the Social Security tax rate increases at a decreasing rate.
no Social Security tax is collected for incomes in excess of a "cap" income level.
Question 15
Which of the following is the largest expenditure item of state governments?
Multiple Choice
Public welfare
Highways
Education
Health and hospitals
Question 16
Aggregate demand is best described as the relationship between the:
multiple choice
quantity demanded of a good or service and the price of the good or service.
quantity demanded in a market and the market price.
quantity of real GDP demanded in the economy and the price level.
quantity demanded and the price.
Question 17
For each of the following scenarios, determine the effect on aggregate supply.
a. There is an unexpected decrease in oil prices. This causes:
multiple choice 1
a movement along the aggregate supply curve to the right, indicating an increase in the quantity of real GDP supplied.
a movement along the aggregate supply curve to the left, indicating a decrease in the quantity of real GDP supplied.
an increase in aggregate supply, shifting the aggregate supply curve to the right.
a decrease in aggregate supply, shifting the aggregate supply curve to the left.
b. The government increases the amount that all producers are required to contribute to health insurance coverage. This causes:
multiple choice 2
a movement along the aggregate supply curve to the right, indicating an increase in the quantity of real GDP supplied.
a movement along the aggregate supply curve to the left, indicating a decrease in the quantity of real GDP supplied.
a decrease in aggregate supply, shifting the aggregate supply curve to the left.
an increase in aggregate supply, shifting the aggregate supply curve to the right.
Question 18
Determine the effect on aggregate demand for each of the scenarios described below.
a. All European countries experience an economic expansion, raising incomes in each of the European countries. This causes:
multiple choice 1
an increase in aggregate demand, shifting the aggregate demand curve to the right.
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
b. The government decides to decrease the amount it spends on the military. This causes:
multiple choice 2
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
an increase in aggregate demand, shifting the aggregate demand curve to the right.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
Question 19
The long-run aggregate supply curve is vertical because:
multiple choice
firms cannot change prices or input prices in the long run.
some input prices are sticky in the long run.
all input prices are flexible in the long run.
all input prices are sticky in the long run.
Question 20
For each of the examples below, determine the effect on aggregate demand.
a. In order to reduce the deficit, the government decides to increase the level of taxes in the economy. This causes:
multiple choice 1
an increase in aggregate demand, shifting the aggregate demand curve to the right.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
b. The economy experiences a sustained expansion in stock prices for the majority of companies in the country. This causes:
multiple choice 2
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
an increase in aggregate demand, shifting the aggregate demand curve to the right.
Question 21
Which would most likely shift the aggregate supply curve? A change in the prices of _____.
Multiple Choice
foreign products
domestic products
financial assets
resources
Question 22
Use the following graph to answer the next question.
When output increases from Q1 and the price level decreases from P1, this change will _____.
Multiple Choice
be caused by a shift in the aggregate supply curve from AS1 to AS3
result in a movement along the aggregate demand curve from e1 to e2
result in a movement along the aggregate demand curve from e3 to e1
be caused by a shift in the aggregate supply curve from AS1 to AS2
Question 23
In the aggregate demand-aggregate supply model, the economy's price level is assumed to be _____.
Multiple Choice
variable, unlike in the aggregate expenditures model
constant, just like in the aggregate expenditures model
variable, just like in the aggregate expenditures model
constant, unlike in the aggregate expenditures model
Question 24
The aggregate demand curve or schedule shows the relationship between the total demand for output and the _____.
Multiple Choice
price level
income level
real GDP
interest rate
Question 25
An increase in aggregate demand is most likely to be caused by a(n) _____.
Multiple Choice
decrease in government spending
decrease in the tax rates on household income
decrease in expected returns on investment
increase in real interest rates
Question 26
An increase in personal income taxes will cause a(n) _____.
Multiple Choice
increase (or shift right) in aggregate demand
decrease (or shift left) in aggregate demand
increase in the quantity of real output demanded (or movement down along AD)
decrease in the quantity of real output demanded (or movement up along AD)
Question 27
Which of the following events would most likely reduce aggregate demand?
Multiple Choice
A reduction in the amount of existing capital stock.
An increase in real interest rates.
A reduction in business and personal tax rates.
An increase in expected returns on investment.
Question 28
Which would most likely increase aggregate supply?
Multiple Choice
An increase in productivity
A decrease in personal income taxes
A decrease in business subsidies
An increase in the prices of imported products
Question 29
Use the following table which shows the aggregate demand and aggregate supply schedules for a hypothetical economy to answer the next question.
Real Domestic Output Demanded (in billions) Price Level (index value) Real Domestic Output Supplied (in billions)
$3,000 350 $9,000
4,000 300 8,000
5,000 250 7,000
6,000 200 6,000
7,000 150 5,000
8,000 100 4,000
The equilibrium price and output levels will be _____.
Multiple Choice
250 and $7,000
200 and $5,000
300 and $8,000
200 and $6,000
Question 30
The long-run aggregate supply curve is _____.
Multiple Choice
upward-sloping and becomes flatter at output levels above the full-employment output
upward-sloping and becomes steeper at output levels above the full-employment output
horizontal
Which of the following transactions best represents the government making a transfer payment to a household or business?
multiple choice
The federal government's Supplemental Nutritional Assistance Program assists low-income families with purchasing food.
The federal government's Internal Revenue Service hires extra accountants during the tax season to audit tax returns.
The state government's Office of Motor Vehicles imposes an annual licensing fee for all in-state vehicles.
The local government's Department of Parks and Recreation operates a local pool for residents in the summer.
Question 2
Which of the following descriptions is most representative of the mix of revenues and expenditures of the federal government?
multiple choice
Revenue is predominantly from property taxes but may include sales taxes or income taxes. Expenditures include investments in education and public welfare.
Revenue is predominantly from sales taxes and may include personal or corporate income taxes. Expenditures include investments in education and infrastructure.
Revenue is predominantly from income taxes and payroll taxes. Expenditures include income security and interest on the national debt.
Revenue is predominantly from excise taxes and property taxes. Expenditures include investments in infrastructure and national defense.
Question 3
How is the public debt calculated?
rev: 06_21_2018
Multiple Choice
By subtracting current government spending from current government tax revenues
By summing the annual government purchases over time
By subtracting the government's total liabilities from its total assets
By summing the annual difference between tax revenues and government spending over the years
Question 4
Which of the following is not a significant source of revenue for the U.S. federal government?
Multiple Choice
Personal income taxes
Corporate income taxes
Property taxes
Payroll taxes
Question 5
Which one of the following is not an excise tax of the federal government?
Multiple Choice
Gasoline tax
General sales tax
Correct
Alcoholic beverage tax
Tobacco tax
Question 6
A federal budget deficit exists when federal government
Multiple Choice
taxation is decreasing in a given year.
spending is increasing in a given year.
assets are less than liabilities in a given year.
spending exceeds tax revenues in a given year.
Question 7
Which of the following is the largest expenditure item of local governments?
Multiple Choice
Highways
Public safety
Welfare
Education
Question 8
A tax is regressive if it
Multiple Choice
takes a higher percentage of income as income increases.
takes the same percentage of income regardless of income level.
is levied on consumers.
takes a smaller percentage of income as income increases.
Question 9
Many states in the U.S. acquire significant amounts of funds from the following, except
Multiple Choice
property taxes.
state-run lotteries.
personal income taxes.
grants from the Federal government.
Question 10
One important reason why the United States government is not likely to go bankrupt even with a large public debt is that it has
Multiple Choice
the power to print money to finance the debt.
a strong military to protect it from creditors.
the capacity to pay off its outstanding debt with gold.
the ability to decrease interest rates and increase investment spending.
Question 11
The circular flow model with government included would show that government
Multiple Choice
obtains revenues in the product market and uses it to cover costs in the resource market.
produces goods and services and sells them in the product market to generate net taxes.
controls economic resources and sells them in the resource market.
provides goods and services to businesses and households and pays for them with net taxes.
Question 12
A public debt that is owed to foreigners can be burdensome because
Multiple Choice
the payment of interest will conflict with a nation's foreign aid programs.
the payment of interest reduces the volume of goods and services available for domestic uses.
the payment of interest will necessarily have a deflationary effect on prices in the paying nation.
foreign interest rates are persistently higher than domestic interest rates.
Question 13
Which of the following is not a government activity that is involved in public finance?
Multiple Choice
Running government-owned enterprises such as hospitals, utilities, and lotteries.
Regulating the activities of firms in the financial sector of the economy.
Providing public goods and services such as national defense and education.
Redistributing income through various taxes and income-transfer payments.
Question 14
The Social Security tax is regressive because
Multiple Choice
the Social Security tax rate applied does not rise with the salary level.
each individual must pay a set percentage of his or her income in Social Security taxes.
as income increases, the Social Security tax rate increases at a decreasing rate.
no Social Security tax is collected for incomes in excess of a "cap" income level.
Question 15
Which of the following is the largest expenditure item of state governments?
Multiple Choice
Public welfare
Highways
Education
Health and hospitals
Question 16
Aggregate demand is best described as the relationship between the:
multiple choice
quantity demanded of a good or service and the price of the good or service.
quantity demanded in a market and the market price.
quantity of real GDP demanded in the economy and the price level.
quantity demanded and the price.
Question 17
For each of the following scenarios, determine the effect on aggregate supply.
a. There is an unexpected decrease in oil prices. This causes:
multiple choice 1
a movement along the aggregate supply curve to the right, indicating an increase in the quantity of real GDP supplied.
a movement along the aggregate supply curve to the left, indicating a decrease in the quantity of real GDP supplied.
an increase in aggregate supply, shifting the aggregate supply curve to the right.
a decrease in aggregate supply, shifting the aggregate supply curve to the left.
b. The government increases the amount that all producers are required to contribute to health insurance coverage. This causes:
multiple choice 2
a movement along the aggregate supply curve to the right, indicating an increase in the quantity of real GDP supplied.
a movement along the aggregate supply curve to the left, indicating a decrease in the quantity of real GDP supplied.
a decrease in aggregate supply, shifting the aggregate supply curve to the left.
an increase in aggregate supply, shifting the aggregate supply curve to the right.
Question 18
Determine the effect on aggregate demand for each of the scenarios described below.
a. All European countries experience an economic expansion, raising incomes in each of the European countries. This causes:
multiple choice 1
an increase in aggregate demand, shifting the aggregate demand curve to the right.
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
b. The government decides to decrease the amount it spends on the military. This causes:
multiple choice 2
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
an increase in aggregate demand, shifting the aggregate demand curve to the right.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
Question 19
The long-run aggregate supply curve is vertical because:
multiple choice
firms cannot change prices or input prices in the long run.
some input prices are sticky in the long run.
all input prices are flexible in the long run.
all input prices are sticky in the long run.
Question 20
For each of the examples below, determine the effect on aggregate demand.
a. In order to reduce the deficit, the government decides to increase the level of taxes in the economy. This causes:
multiple choice 1
an increase in aggregate demand, shifting the aggregate demand curve to the right.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
b. The economy experiences a sustained expansion in stock prices for the majority of companies in the country. This causes:
multiple choice 2
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
an increase in aggregate demand, shifting the aggregate demand curve to the right.
Question 21
Which would most likely shift the aggregate supply curve? A change in the prices of _____.
Multiple Choice
foreign products
domestic products
financial assets
resources
Question 22
Use the following graph to answer the next question.
When output increases from Q1 and the price level decreases from P1, this change will _____.
Multiple Choice
be caused by a shift in the aggregate supply curve from AS1 to AS3
result in a movement along the aggregate demand curve from e1 to e2
result in a movement along the aggregate demand curve from e3 to e1
be caused by a shift in the aggregate supply curve from AS1 to AS2
Question 23
In the aggregate demand-aggregate supply model, the economy's price level is assumed to be _____.
Multiple Choice
variable, unlike in the aggregate expenditures model
constant, just like in the aggregate expenditures model
variable, just like in the aggregate expenditures model
constant, unlike in the aggregate expenditures model
Question 24
The aggregate demand curve or schedule shows the relationship between the total demand for output and the _____.
Multiple Choice
price level
income level
real GDP
interest rate
Question 25
An increase in aggregate demand is most likely to be caused by a(n) _____.
Multiple Choice
decrease in government spending
decrease in the tax rates on household income
decrease in expected returns on investment
increase in real interest rates
Question 26
An increase in personal income taxes will cause a(n) _____.
Multiple Choice
increase (or shift right) in aggregate demand
decrease (or shift left) in aggregate demand
increase in the quantity of real output demanded (or movement down along AD)
decrease in the quantity of real output demanded (or movement up along AD)
Question 27
Which of the following events would most likely reduce aggregate demand?
Multiple Choice
A reduction in the amount of existing capital stock.
An increase in real interest rates.
A reduction in business and personal tax rates.
An increase in expected returns on investment.
Question 28
Which would most likely increase aggregate supply?
Multiple Choice
An increase in productivity
A decrease in personal income taxes
A decrease in business subsidies
An increase in the prices of imported products
Question 29
Use the following table which shows the aggregate demand and aggregate supply schedules for a hypothetical economy to answer the next question.
Real Domestic Output Demanded (in billions) Price Level (index value) Real Domestic Output Supplied (in billions)
$3,000 350 $9,000
4,000 300 8,000
5,000 250 7,000
6,000 200 6,000
7,000 150 5,000
8,000 100 4,000
The equilibrium price and output levels will be _____.
Multiple Choice
250 and $7,000
200 and $5,000
300 and $8,000
200 and $6,000
Question 30
The long-run aggregate supply curve is _____.
Multiple Choice
upward-sloping and becomes flatter at output levels above the full-employment output
upward-sloping and becomes steeper at output levels above the full-employment output
horizontal
vertical
Saturday, May 15, 2021
ECO372T Week 5 Apply Fiscal and Monetary Policy SCORE 98 PERCENT
Question 1
The graph below depicts an economy where an increase in aggregate demand has caused inflation. The economy's current level of real GDP (Y2) is above its long-run equilibrium. This is illustrated by the long-run aggregate supply curve (LRAS) and a price level (P2) above the equilibrium value of Pe.
Which of the following is an example of an automatic stabilizer that would help this economy move toward full employment again?
multiple choice
A reduction in the average tax rate
An increase in the average tax rate
A decrease in government purchases
A reduced need for government transfer payments
Question 2
For each of the following scenarios, determine which time lag is most likely to result when designing and implementing fiscal policy.
a. The separation of power demonstrated between the legislative and executive branches of government combined with strong partisanship attitude among our elected politicians.
multiple choice 1
Recognition lag
Legislative lag
Implementation lag
All of these lags
b. The fact that it takes economists working for the National Bureau of Economic Research months to declare the dates of peaks and troughs.
multiple choice 2
Recognition lag
Legislative lag
Implementation lag (Incorrect)
All of these lags
c. The time it takes to design and build new infrastructure after these projects have been passed by the legislature.
multiple choice 3
Recognition lag (Incorrect)
Legislative lag
Implementation lag
All of these lags
Question 3
If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n)
Multiple Choice
contractionary fiscal policy.
supply-side fiscal policy.
nondiscretionary fiscal policy.
expansionary fiscal policy.
Question 4
When changes in taxes and government purchases occur in the economy without explicit action by Congress, such changes are referred to as
implicit stabilization.
cyclical stabilization.
automatic stabilizers.
discretionary fiscal policy.
Question 5
If taxes and government expenses did not vary with income, then income would
Multiple Choice
be less stable.
be more stable.
be closer to potential income.
not change.
Question 6
When the federal government changes purchases and/or taxes to stimulate the economy or rein in inflation, such policy is
Multiple Choice
active monetary policy.
discretionary fiscal policy.
automatic fiscal policy.
active federal policy.
Question 7
As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system
Multiple Choice
increases crowding out in the economy.
serves as an automatic stabilizer for the economy.
offsets the timing problem for fiscal policy.
decreases real interest rates in the economy.
Question 8
When the federal government cuts taxes and increases purchases to stimulate the economy during a period of recession, such actions are designed to be
Multiple Choice
expansionary.
contractionary.
passive.
automatic.
Question 9
Due to automatic stabilizers, when the nation's total income rises, government transfer payments
Multiple Choice
and tax revenues increase.
increase and tax revenues decrease.
decrease and tax revenues increase.
and tax revenues decrease.
Question 10
Which of the following is an example of built-in stability? As real GDP decreases,
Multiple Choice
income tax revenues decrease and transfer payments increase.
income tax revenues and transfer payments both decrease.
income tax revenues increase and transfer payments decrease.
income tax revenues and transfer payments both increase.
Question 11
One timing problem in using fiscal policy to counter a recession is the "legislative lag" that occurs between the
Multiple Choice
time fiscal action is taken and the time that the action has its effect on the economy.
start of the recession and the time it takes to recognize that the recession has started.
time the need for the fiscal action is recognized and the time that the action is taken.
start of a predicted recession and the actual start of the recession.
Question 12
When the federal government uses taxation and purchasing actions to stimulate the economy it is conducting
Multiple Choice
monetary policy.
employment policy.
incomes policy.
fiscal policy.
Question 13
Using fiscal policy to stabilize the economy is difficult because
Multiple Choice
there are time lags involved in the use of fiscal policy.
potential income is known.
the effects of policy changes are known with certainty.
the size of the government debt doesn't matter.
Question 14
Fiscal policy is enacted through changes in
Multiple Choice
the supply of money and foreign exchange.
interest rates and the price level.
unemployment and inflation.
taxation and government purchases.
Question 15
The time that elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n)
Multiple Choice
recognition lag.
budget lag.
implementation lag.
legislative lag.
Question 16
Choose the best response for each of the following statements.
a. When the Federal Reserve makes an open market purchase, the Fed:
multiple choice
sells bonds to the public, which decreases the money supply.
buys bonds from the public, which increases the money supply.
sells bonds to the public, which increases the money supply.
buys bonds from the public, which decreases the money supply.
b. If the Fed wants to increase interest rates, it should make an open market sale .
This would decrease the money supply and achieve the increase in interest rates.
Question 17
a. The discount rate is the:
multiple choice 1
interest rate at which banks can borrow reserves from the Federal Reserve.
interest rate at which banks can borrow reserves from other banks.
lowest interest rate that banks can charge for loans to their most creditworthy customers.
lowest interest rate that banks can charge for lending reserves to other banks or financial institutions.
b. If the Fed were to decrease the discount rate, banks will borrow:
multiple choice 2
more reserves, causing a decrease in lending and the money supply.
more reserves, causing an increase in lending and the money supply.
fewer reserves, causing a decrease in lending and the money supply.
fewer reserves, causing an increase in lending and the money supply.
Question 18
The interest rate that the Fed charges on loans made directly to banks is called _____.
Multiple Choice
the prime rate
interest on reserves
the federal funds rate
the discount rate
Question 19
Economic investment refers to _____.
Multiple Choice
postponing purchases of goods and services.
making new additions to a firm's stock of capital.
selling a financial asset for a gain.
buying a financial asset for a gain.
Question 20
An increase in the money supply, all else held constant, usually _____.
Multiple Choice
decreases the interest rate and decreases aggregate demand
decreases the interest rate and increases aggregate demand
increases the interest rate and decreases aggregate demand
increases the interest rate and increases aggregate demand
Question 21
If the Fed sells government securities to the general public in the open market, the _____.
Multiple Choice
Fed gives the securities to the public; the public pays for the securities by writing checks that when cleared will increase commercial bank reserves at the Fed
public gives the securities to the Fed in exchange for a Fed check, which when deposited at commercial banks will decrease their reserves at the Fed
public gives the securities to the Fed in exchange for a Fed check, which when deposited at commercial banks will increase their reserves at the Fed
Fed gives the securities to the public; the public pays for the securities by writing checks that when cleared will decrease commercial bank reserves at
Question 22
Which of the monetary policy tools can alter both the level of excess reserves and the money multiplier?
Multiple Choice
The federal funds rate
The reserve requirement
The discount rate
Open-market operations
Question 23
The interest rate at which the Federal Reserve Banks lend to commercial banks is called the _____.
Multiple Choice
short-term rate
federal funds rate
discount rate
prime rate
Question 24
The purchase and sale of government securities by the Fed is called _____.
Multiple Choice
federal funds market
money market transactions
term auction facility
open market operations
Question 25
The purpose of expansionary monetary policy is to increase _____.
Multiple Choice
real GDP
the GDP gap
interest rates
the inflation rate
Question 26
The discount rate is the interest _____.
Multiple Choice
rate at which commercial banks lend to the public
yield on long-term government bonds
rate at which the Federal Reserve Banks lend to commercial banks
rate at which the central banks lend to the U.S. Treasury
Question 27
Financial markets pay close attention to changes in the federal funds rate because these changes _____.
Multiple Choice
affect other interest rates in the economy
indicate commercial bank lending policies
directly affect the interest payments on the national debt
directly affect a large volume of loans
Question 28
The Fed directly sets _____.The Fed directly sets _____.
Multiple Choice
neither the federal funds rate nor the prime rate
the prime rate but not the federal funds rate
the discount rate and the prime rate
both the federal funds rate and the prime rate
Question 29
Which of the following statements is true?
Multiple Choice
The Federal Reserve does not set the federal funds rate, but it influences it through the use of its open-market operations.
The Federal Reserve sets the federal funds rate.
The Federal Reserve will set a higher target for the federal funds rate if pursuing an expansionary monetary policy.
The Federal Reserve sets the target for the federal funds rate, and then uses the reserve requirement to push banks toward that target.
Question 30
When the Federal Reserve Banks decide to buy government bonds from banks and the public, the supply of reserves in the federal funds market _____.
Multiple Choice
increases and the federal funds rate increases
decreases and the federal funds rate increases
decreases and the federal funds rate decreases
The graph below depicts an economy where an increase in aggregate demand has caused inflation. The economy's current level of real GDP (Y2) is above its long-run equilibrium. This is illustrated by the long-run aggregate supply curve (LRAS) and a price level (P2) above the equilibrium value of Pe.
Which of the following is an example of an automatic stabilizer that would help this economy move toward full employment again?
multiple choice
A reduction in the average tax rate
An increase in the average tax rate
A decrease in government purchases
A reduced need for government transfer payments
Question 2
For each of the following scenarios, determine which time lag is most likely to result when designing and implementing fiscal policy.
a. The separation of power demonstrated between the legislative and executive branches of government combined with strong partisanship attitude among our elected politicians.
multiple choice 1
Recognition lag
Legislative lag
Implementation lag
All of these lags
b. The fact that it takes economists working for the National Bureau of Economic Research months to declare the dates of peaks and troughs.
multiple choice 2
Recognition lag
Legislative lag
Implementation lag (Incorrect)
All of these lags
c. The time it takes to design and build new infrastructure after these projects have been passed by the legislature.
multiple choice 3
Recognition lag (Incorrect)
Legislative lag
Implementation lag
All of these lags
Question 3
If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n)
Multiple Choice
contractionary fiscal policy.
supply-side fiscal policy.
nondiscretionary fiscal policy.
expansionary fiscal policy.
Question 4
When changes in taxes and government purchases occur in the economy without explicit action by Congress, such changes are referred to as
implicit stabilization.
cyclical stabilization.
automatic stabilizers.
discretionary fiscal policy.
Question 5
If taxes and government expenses did not vary with income, then income would
Multiple Choice
be less stable.
be more stable.
be closer to potential income.
not change.
Question 6
When the federal government changes purchases and/or taxes to stimulate the economy or rein in inflation, such policy is
Multiple Choice
active monetary policy.
discretionary fiscal policy.
automatic fiscal policy.
active federal policy.
Question 7
As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system
Multiple Choice
increases crowding out in the economy.
serves as an automatic stabilizer for the economy.
offsets the timing problem for fiscal policy.
decreases real interest rates in the economy.
Question 8
When the federal government cuts taxes and increases purchases to stimulate the economy during a period of recession, such actions are designed to be
Multiple Choice
expansionary.
contractionary.
passive.
automatic.
Question 9
Due to automatic stabilizers, when the nation's total income rises, government transfer payments
Multiple Choice
and tax revenues increase.
increase and tax revenues decrease.
decrease and tax revenues increase.
and tax revenues decrease.
Question 10
Which of the following is an example of built-in stability? As real GDP decreases,
Multiple Choice
income tax revenues decrease and transfer payments increase.
income tax revenues and transfer payments both decrease.
income tax revenues increase and transfer payments decrease.
income tax revenues and transfer payments both increase.
Question 11
One timing problem in using fiscal policy to counter a recession is the "legislative lag" that occurs between the
Multiple Choice
time fiscal action is taken and the time that the action has its effect on the economy.
start of the recession and the time it takes to recognize that the recession has started.
time the need for the fiscal action is recognized and the time that the action is taken.
start of a predicted recession and the actual start of the recession.
Question 12
When the federal government uses taxation and purchasing actions to stimulate the economy it is conducting
Multiple Choice
monetary policy.
employment policy.
incomes policy.
fiscal policy.
Question 13
Using fiscal policy to stabilize the economy is difficult because
Multiple Choice
there are time lags involved in the use of fiscal policy.
potential income is known.
the effects of policy changes are known with certainty.
the size of the government debt doesn't matter.
Question 14
Fiscal policy is enacted through changes in
Multiple Choice
the supply of money and foreign exchange.
interest rates and the price level.
unemployment and inflation.
taxation and government purchases.
Question 15
The time that elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n)
Multiple Choice
recognition lag.
budget lag.
implementation lag.
legislative lag.
Question 16
Choose the best response for each of the following statements.
a. When the Federal Reserve makes an open market purchase, the Fed:
multiple choice
sells bonds to the public, which decreases the money supply.
buys bonds from the public, which increases the money supply.
sells bonds to the public, which increases the money supply.
buys bonds from the public, which decreases the money supply.
b. If the Fed wants to increase interest rates, it should make an open market sale .
This would decrease the money supply and achieve the increase in interest rates.
Question 17
a. The discount rate is the:
multiple choice 1
interest rate at which banks can borrow reserves from the Federal Reserve.
interest rate at which banks can borrow reserves from other banks.
lowest interest rate that banks can charge for loans to their most creditworthy customers.
lowest interest rate that banks can charge for lending reserves to other banks or financial institutions.
b. If the Fed were to decrease the discount rate, banks will borrow:
multiple choice 2
more reserves, causing a decrease in lending and the money supply.
more reserves, causing an increase in lending and the money supply.
fewer reserves, causing a decrease in lending and the money supply.
fewer reserves, causing an increase in lending and the money supply.
Question 18
The interest rate that the Fed charges on loans made directly to banks is called _____.
Multiple Choice
the prime rate
interest on reserves
the federal funds rate
the discount rate
Question 19
Economic investment refers to _____.
Multiple Choice
postponing purchases of goods and services.
making new additions to a firm's stock of capital.
selling a financial asset for a gain.
buying a financial asset for a gain.
Question 20
An increase in the money supply, all else held constant, usually _____.
Multiple Choice
decreases the interest rate and decreases aggregate demand
decreases the interest rate and increases aggregate demand
increases the interest rate and decreases aggregate demand
increases the interest rate and increases aggregate demand
Question 21
If the Fed sells government securities to the general public in the open market, the _____.
Multiple Choice
Fed gives the securities to the public; the public pays for the securities by writing checks that when cleared will increase commercial bank reserves at the Fed
public gives the securities to the Fed in exchange for a Fed check, which when deposited at commercial banks will decrease their reserves at the Fed
public gives the securities to the Fed in exchange for a Fed check, which when deposited at commercial banks will increase their reserves at the Fed
Fed gives the securities to the public; the public pays for the securities by writing checks that when cleared will decrease commercial bank reserves at
Question 22
Which of the monetary policy tools can alter both the level of excess reserves and the money multiplier?
Multiple Choice
The federal funds rate
The reserve requirement
The discount rate
Open-market operations
Question 23
The interest rate at which the Federal Reserve Banks lend to commercial banks is called the _____.
Multiple Choice
short-term rate
federal funds rate
discount rate
prime rate
Question 24
The purchase and sale of government securities by the Fed is called _____.
Multiple Choice
federal funds market
money market transactions
term auction facility
open market operations
Question 25
The purpose of expansionary monetary policy is to increase _____.
Multiple Choice
real GDP
the GDP gap
interest rates
the inflation rate
Question 26
The discount rate is the interest _____.
Multiple Choice
rate at which commercial banks lend to the public
yield on long-term government bonds
rate at which the Federal Reserve Banks lend to commercial banks
rate at which the central banks lend to the U.S. Treasury
Question 27
Financial markets pay close attention to changes in the federal funds rate because these changes _____.
Multiple Choice
affect other interest rates in the economy
indicate commercial bank lending policies
directly affect the interest payments on the national debt
directly affect a large volume of loans
Question 28
The Fed directly sets _____.The Fed directly sets _____.
Multiple Choice
neither the federal funds rate nor the prime rate
the prime rate but not the federal funds rate
the discount rate and the prime rate
both the federal funds rate and the prime rate
Question 29
Which of the following statements is true?
Multiple Choice
The Federal Reserve does not set the federal funds rate, but it influences it through the use of its open-market operations.
The Federal Reserve sets the federal funds rate.
The Federal Reserve will set a higher target for the federal funds rate if pursuing an expansionary monetary policy.
The Federal Reserve sets the target for the federal funds rate, and then uses the reserve requirement to push banks toward that target.
Question 30
When the Federal Reserve Banks decide to buy government bonds from banks and the public, the supply of reserves in the federal funds market _____.
Multiple Choice
increases and the federal funds rate increases
decreases and the federal funds rate increases
decreases and the federal funds rate decreases
increases and the federal funds rate decreases
ECON201 Week 5 Discussion Business and their costs
Complete the following simulation and answer the questions below.
- What factors affected demand for your product?
- What pricing strategies did you use?
- Describe your most successful day and your least successful? Why were they successful or unsuccessful?
- What was your total # of cups sold at the end of the week?
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