If, in the best case scenario, increased government spending were used to revive the economy from a recession, the increased spending would
be offset by a decrease in inflation
be a little more than the fall in consumer confidence in order to help make up for lost GDP
not need to be as large as the fall in consumer consumption
be exactly the same as the fall in consumer consumption.
In what way are monetary and fiscal policies similar?
They both involve borrowing from the public
They are both somewhat ineffective when it comes to combating real shocks
They both target the aggregate demand curve to combat the business cycle
All of these answers are correct
Mistimed contractionary fiscal policy can cause
a real shock
rising interest rates
Government spending becomes a more effective policy tool when
consumers are too pessimistic and not spending
interest rates in the economy are rising simultaneously
the government raises taxes to finance spending
the economy is above the Solow growth curve
An increase in government spending growth will cause inflation to fall in
the short run
the long run
both the short run and the long run
neither the short run nor the long run
An increase in government spending growth will cause the AD curve to
shift outward and then inward
If the government increases its spending, financing methods that can cause crowding out include 1)Selling Bonds 2)Raising corporate investment taxes 3)raising individual income taxes
none of the options
The largest component of GDP is
When consumers reduce spending, the reduction in velocity of money is split between
decrease in inflation and decrease growth
decrease in inflation and increase in growth
decrease in the money supply and decrease in inflation
decrease in the money supply and decrease in growth
Examples of expansionary fiscal policy include increases
I. in government spending.
II. in income taxes.
III. of the money supply
I & II
II & III
Fiscal policy is well-suited to counteract a recession or depression when
unemployment is low.
taxes are high.
a real negative shock occurs.
resources are under utilized.
A decrease in consumption growth will cause aggregate demand to
shift inward and then outward
In a typical year, changes in government spending compared to overall spending are relatively
Which would be the most liquid?
Small time deposits
small cut diamonds
Monet oil painting
money market mutual funds
When the Federal Reserve makes an open market purchase, the reserves of the banking system will
be too difficult to predict
What part of the money pyramid does the Fed have direct control over?
the monetary base
M1 plus the monetary base
An increase in money growth will cause inflation to increase in
the long run and the short run
neither the long run nor the short run
The members of the Board of Governors of the Federal Reserve have 14-year non-renewable terms. Thus,
they are somewhat insulated from the political process.
the chairman of the board of governors also has a 14-year term.
every president of a federal reserve district bank will serve at least 14 years on the BOG.
the New York Federal Reserve District Bank President can only serve 14 years on the FOMC.
If the Fed buys government bonds, then all of the following will likely increase except
Federal Funds rate
When the Federal Reserve buys bonds, the supply curve for bond
sometimes shifts inward, sometimes outward
When the Federal Reserve conducts monetary policy, the Federal Reserve usually focuses on
the discount rate
Required reserves are the percent of
deposits that banks are required to hold as reserves.
reserves that banks are required to hold as reserves.
loans that banks are required to hold as reserves.
None of the answers is correct.
Which of the following assets would you classify as being most liquid?
small time deposits
a gold nugget
Which of the following is TRUE of the structure of the Fed?
I. All seven members of the Board of Governors are appointed by the President.
II. The Fed is an agency of the federal government.
III. The Secretary of the Treasury chairs the Federal Open Market Committee.
I & III
I,II, & III
As a result of an increase in the growth rate of money supply
real GDP growth rate increases only in the short run, and the inflation rate increases in both the short run and the long run.
real GDP growth rate increases only in the long run, and the inflation rate increases only in the short run.
real GDP growth rate increases in both the short run and the long run, and the inflation rate increases only in the short run.
both the real growth rate and the inflation rate increase only in the short run.
When the Fed conducts open market operations to decrease the monetary base, real GDP growth
increases in the long run
decreases in the long run
decreases in both the short run and the long run
increases in both the short run and the long run