Which of the following rates does the Fed actually set?
the Federal Funds rate
the discount rate
the market interest rates
all of these rates
Currency, Checkable Deposits, Demand deposits
Currency, Federal Reserves, Checkable deposits
Checkable Deposits only
Currency, Checkable Deposits, Small time deposits
Why does so much U.S. currency circulate in other countries?
Several countries use the U.S. dollar as their official currency.
The U.S. dollar is frequently used in drug trafficking.
Dollars hold their value in unstable countries.
All of the above
In the United States, the amount of cash per capita is about $3,000. This figure
shows how much currency each American holds in their checking accounts.
misrepresents actual currency holdings in the United States because a lot of dollars are held outside the country.
accurately represents the size of the underground economy in the United States
shows how much the world depends on the U.S. monetary system.
The Federal Reserve's major tools to control the money supply are
I. open market operations.
II. discount rate lending and the term auction facility.
III. required reserve ratio and payment of interest on reserves.
IV. federal funds lending
I, II, III
I, II, III, IV
The Federal Funds rate is the interest rate charged on a(n)
overnight loan from one bank to another.
low interest loan from the Federal Reserve to a bank.
loan from the Federal Reserve to a bank.
long-term loan from one bank to another.
Why is the SRAS curve steeper above its intersection with the Solow growth curve?
Wages are stickier in the upward direction.
Wages are less sticky in the upward direction
Lower inflation will lead to faster growth.
Employees become less motivated to work during times of unexpected inflation.
According to the quantity theory of money, an increase in money supply causes an increase in
velocity of money
The short-run aggregate supply curve shows a relationship between the real growth rate and the
actual inflation rate
expected inflation rate
long-run inflation rate
none of the above
How has the role of agricultural production changed in the Indian economy?
It is now only 1 percent of GDP.
It has fallen to about 20 percent of GDP due to economic diversification.
It has remained about 40 percent of GDP, but has doubled in yield.
It has become a greater part of GDP, due to technological advances.
Imagine that a government starts out with the budget surplus. If in the next period the government temporarily runs a budget deficit, what would you expect to happen to aggregate demand?
AD would increase
AD would decrease
AD would remain the same
AD would lie on the Solow growth curve
In the AD and SRAS model, changes in the growth rate of C, I, G, and NX tend to be changes in:
all of the above
The Solow growth rate is the rate of economic growth that occurs when
inflation is moderate
wages and prices are flexible
wages and prices are sticky
the money supply is growing
An increase in _______ will shift the SRAS curve
actual inflation, but not expected inflation
expected inflation, but not actual inflation
both expected and actual inflation
neither expected nor actual inflation
Suppose both the growth rate of the money supply and the velocity of money are fixed, then an increase in the growth rate of exports will cause
a shift of the dynamic AD curve to the right.
a shift of the dynamic AD curve to the left.
a downward movement along the dynamic AD curve.
an upward movement along the dynamic AD curve.
The aggregate demand curve shows all the combinations of ______ that are consistent with a specified rate of spending growth.
inflation and real GDP growth rates
employment rates and price levels
production shocks and flexible price
money velocity and money supply
n the basic
and Solow growth curve model, shocks to aggregate demand always cause
I. changes in real GDP.
II. changes in inflation.
III. changes in spending growth.
The Solow growth curve is represented by a vertical line at the Solow growth rate because
I. it does not depend on the rate of inflation.
II. there is an underlying assumption of strong money neutrality.
III. it does not depend on the stock of factors of production
Which of the following is a shock that could shift the Solow growth curve?
negative supply shock
The average annual rate of growth of real GDP in the United States has fluctuated around ____ for the last 50 years.
What are some of the economic effects of a tariff?
Wealth is redistributed from wealthy nations to poor nations and taxes fall.
Unemployment and inflation rates both fall.
Capital and labor are used less efficiently.
Trade remains the same in the long run and GDP rises in the nation that enacts the tariff.
If wages are not as flexible as prices, an increase in money growth will lead to
an increase in inflation and a rise in real long-run GDP growth.
an increase in inflation but no rise in real short-run GDP growth.
an increase in inflation and firms profits.
no change in inflation, but a fall in firms' profits.
Politicians and especially the general public worry about recessions because of
changes in the Solow Growth rate
What factors triggered the Great Depression?
decreased consumer spending and tight monetary policy
decreased investment and increased inflation
decreased employment and increased money supply
decreased inflation and increased income taxes