AP Macroeconomics Unit 4 Multiple Choice and Vocabulary – Flashcards

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The _______, or the _ _ _, is the increase in consumer spending when disposable income rises by $1.
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Marginal Propensity to Consume
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The _______, or the _ _ _, is the increase in household saving when disposable income rises by $1.
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Marginal Propensity to Save
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Formula For MPC
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Change in Consumer Spending / Change in Disposable Income
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The ________ is the ratio of total change in Real GDP cause by an autonomous change in aggregate spending to the size of that autonomous change
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Multiplier
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An _______ _______ __ ____________ _____________ is an initial rise or fall in aggregate spending that is the cause, not the result, of a series of income and spending changes.
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autonomous change in aggregate spending
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Formula for the Multiplier
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1 / (1-MPC)
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The __________ ___________ is an equation showing how an individual household's consumer spending varies with the household's current disposable income.
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consumption function
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_______________ _____________ _____________ is the amount of money a household would spend if it had no disposable income.
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Autonomous consumer spending
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The __________ ____________ _____________ is the relationship for the economy as a whole between aggregate current disposable income and aggregate consumer spending.
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Aggregate Consumption Function
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_________ ___________ __________ is the investment spending that businesses intend to undertake during a given period
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Planned investment spending
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___________ are stocks of goods held to satisfy future sales
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inventories
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_____________ _____________ is the value of the change in total inventories held in the economy during a given period
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inventory investment
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Positive __________ __________ ___________ occurs when actual sales are less than businesses expected, leading to unplanned increases in inventories. Sales in excess of expectations result in negative unplanned inventory investment
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unplanned inventory investment
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________ __________ _________ is the sum of planned investment spending and unplanned inventory invesement
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Actual investment spending
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Changes in Which of the following leads to a shift of the aggregate consumption function? I. expected future disposable income II. aggregate wealth III. current disposable income
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I, II, and III
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The slope of a family's consumption function is equal to ____________
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the Marginal Propensity to Consume
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The level of planned investment spending is negatively related to the _____________
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interest rate
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Actual investment spending in any period is equal to ___________
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planned investment spending + unplanned inventory investment
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__________ ____________ is the use of government policy to reduce the severity of recessions and rein in excessively strong expansions
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stabilization policy
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_______ ________ programs are government programs intended to protect families against economic hardship
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social insurance
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________________ fiscal policy increases aggregate demand
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expansionary
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_______________ fiscal policy reduced aggregate demand
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contractionary
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Which of the following contributes to the lag in implementing fiscal policy? I. It takes time for Congress and the President to pass spending and tax changes. II. Current economic data takes time to collect and analyze. III. It takes time to realize an output gap exists.
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I, II, and III
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Which of the following is a government transfer program? a. Social Security b. Medicare/Medicaid c. unemployment insurance d. food stamps e. all of the above
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all of the above
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Which of the following is an example of expansionary fiscal policy? a. increasing taxes b. increasing government spending c. decreasing government transfers d. decreasing interest rates e. increasing the money supply
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increasing government spending
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Which of the following is a fiscal policy that is appropriate to combat inflation? a. decreasing taxes b. decreasing government spending c. increasing government transfers d. increasing interest rates e. expansionary fiscal policy
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decreasing government spending
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An income tax rebate is an example of _____________
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expansionary fiscal policy
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________ ____ _____ are taxes that don't depend on the taxpayer's income
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Lump-sum taxes
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__________ ___________ are government spending and taxation rules that cause fiscal policy to be automatically expansionary when the economy contracts and automatically contractionary when the economy expands
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Automatic stabilizers
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____________ ________ ________ is fiscal policy that is the result of deliberate actions by policy makers rather than rules
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Discretionary fiscal policy
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The Marginal Propensity to consume: I. has a negative relationship to the multiplier II. Is equal to 1. III. represents the proportion of consumers' disposable income that is spent
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III only
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The presence of taxes has what effect on the multiplier? They ______
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decrease it
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A lump sum tax is ___________
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independent of income
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Which of the following is NOT an automatic stabilizer? a. income taxes b. unemployment insurance c. Medicaid d. food stamps e. monetary policy
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monetary policy
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The ________ ____ is the price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year
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interest rate
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According to the __________-___________ ____________ _____________, savings and investment spending are always equal for the economy as a whole
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savings-investment spending identity
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The __________ _________ is the difference between tax revenue and government spending when tax revenue exceeds government spending
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budget surplus
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The ________ ________ is the difference between tax revenue and government spending when government spending exceeds tax revenue.
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budget deficit
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The _________ __________ is the difference between tax revenue and government spending
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budget balance
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___________ _________, the sum of private savings and the budget balance, is the total amount of savings generated within the economy
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National Savings
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____________ ___________ is the net inflow of funds into a country
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Capital Inflow
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A household's ________ is the value of its accumulated savings.
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wealth
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A ___________ _____ is a paper claim that entitles the buyer to future income from the seller
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financial asset
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A _________ _______ is a claim on a tangible object that gives the owner the right to dispose of the object as he or she wishes
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physical asset
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A ____________ is a requirement to pay money in the future
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liability
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____________ _______ are the expenses of negotiating and executing a deal
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transaction costs
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____________ _____ is uncertainty about future outcomes that involve financial losses and gains
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financial risk
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An individual can engage in ______________ by investing in several different assets so that the possible losses are independent events
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diversification
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An asset is ________ if it can be quickly converted into cash without much loss of value.
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liquid
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An asset is ____________ if it cannot be quickly converted into cash without much loss of value.
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illiquid
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A _____ is a lending agreement between an individual lender and an individual borrower
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loan
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A ____________ occurs when a borrower fails to make payments as specified by the loan or bond contract
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default
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A ______-_________ _______ is an asset created by pooling individual loans and selling shares in that pool
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loan-backed security
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A _____________ _____________ is an institution that transforms the funds it gathers from many individuals into financial assets
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financial intermediary
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a _______ ______ is a financial intermediary that creates a stock portfolio and then resells shares of this portfolio to individual investors
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mutual fund
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A _______ ______ is a type of mutual fund that holds assets in order to provide retirement income to its members
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pension fund
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A _____ __________ __________ sells policies that guarantee a payment to a policyholder's beneficiaries when the policyholder dies.
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life insurance company
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a _____ _________ is a claim on a bank that obliges the bank to give the depositor his or her cash when demanded
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bank deposit
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A _____ is a financial intermediary that provides liquid assets in the form of bank deposits to lenders and uses those funds to finance the illiquid investment spending needs of borrowers
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bank
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Decreasing which of the following is a task of the financial system? I. transaction costs II. risk III. liquidity
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I and II only
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Which of the following is NOT a type of financial asset? a. bonds b. stocks c. bank deposits d.loans e. houses
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houses
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The federal government is said to be "dissaving" when _____________
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there is no budget deficit
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A nonprofit institution collects the savings of its members and invests those funds in a wide variety of assets in order to provide its members with income after retirement. This describes a ________
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pension fund
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A financial intermediary that provides liquid financial assets in the form of deposits to lenders and uses their funds to finance the illiquid investment spending needs of borrowers is called a _________________
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bank
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________ is any asset that can easily be used to purchase goods and services
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Money
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_____________ ___ ______________ is cash held by the public
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Currency in circulation
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_____________ _____ ____________ are bank accounts on which people can write checks
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Checkable bank deposits
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The _______ ___________ is the total value of financial assets in the economy that are considered money
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Money supply
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A ____________ ___ ____________ is an asset that individuals acquire for the purpose of trading goods and services rather than for their own consumption
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medium of exchange
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A ________ __ ________ is a means of holding purchasing power over time
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store of value
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A _____ ___ ________ is a measure used to set prices and make economic calculations
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unit of account
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_______________ ______ is a good used as a medium of exchange that has intrinsic value in other uses
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commodity money
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____________-___________ _______ is a medium of exchange with no intrinsic value whose ultimate value is guaranteed by a promise that it can be converted into valuable goods
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commodity-backed money
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__________ _________ is a medium of exchange whose value derives entirely from its official status as a means of payment
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fiat money
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A _________ __________ is an overall measure of the money supply
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monetary aggregate
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________ are financial assets that can't be directly used as a medium of exchange but can be readily converted into cash or checkable bank deposits
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near-moneys
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When you use money to purchase your lunch, money is serving which role(s)? I.medium of exchange II. store of value III. unit of account
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I, II, and III
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When you decide you want "$10 worth" of a product, money is serving which role(s)? I. medium of exchange II. store of value III. unit of account
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II only
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In the United States, the dollar is __________
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fiat money
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Which of the following is the most liquid monetary aggregate? a. M1 b. M2 c. M3 d. near-moneys e. dollar bills
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near-moneys
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Which of the following is the best example of using money as a store of value? a. A customer pays in advance for $10 worth of gasoline at a gas station b. A babysitter puts her earnings in a dresser drawer while she saves to buy a bicycle c. Travelers buy meals on board an airline flight d. Foreign visitors to the United States convert their currency to dollars at the airport. e. You use $1 bills to purchase soda from a vending machine
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A babysitter puts her earnings in a dresser drawer while she saves to buy a bicycle
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The ________ _______ of $1 realized one year from now is equal to $1/(1+r): the amount of money you must lend out today in order to have $1 in one year. It is the value to you today of $1 realized one year from now.
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present value
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The ____ ___________ _______ of a project is the present value of current and future benefits minus the present value of current and future costs
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net present value
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Suppose, for simplicity, that a bank uses a single interest rate for loans and deposits, there is no inflation, and all unspent money is deposited in the bank. The interest rate measures which of the following? I. The Cost of using a dollar today rather than a year from now. II. the benefit of delaying the use of a dollar from today until a year from now. III. the price of borrowing money calculated as a percentage of the amount borrowed
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I, II, and III
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If the interest rate is zero, then the present value of a dollar received at the end of the year is _________
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equal to $1
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IF the interest rate is 10%, the present value of $1 paid to you one year from now is___________
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$0.91
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If the interest rate is 5%, the amount received one year from now as a result of lending $100 today is ____________
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$105
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What is the present value of $100 realized two years from now if the interest rate is 10%?
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$83
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____ __________ are the currency banks hold in their vaults plus their deposits at the Federal Reserve
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bank reserves
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A _-______ is a tool for analyzing a business's financial position by showing, in a single table, the business' assets (on the left) and liabilities (on the right)
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T-account
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The _______ ______ is the fraction of bank deposits that a bank holds as reserves
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reserve ratio
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The _______ _________ ______ is the smallest fraction of deposits that the Federal Reserve allows banks to hold
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required reserve ratio
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A _____ ____ is a phenomenon in which many of a bank's depositors try to withdraw their funds due to fears of a bank failure
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bank run
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__________ ___________ guarantees that a bank's depositors will be paid even if the bank can't come up with the funds, up to a maximum amount per account
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deposite insurance
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__________ _____________ are rules set by the Federal Reserve that determine the required reserve ratio for banks
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reserve requirements
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The _____ ______ is an arrangement in which the Federal Reserve stands ready to lend money to banks
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discount window
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_______ _______ are a bank's reserves over and above its required reserves
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excess reserves
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The _______ ______ is the sum of currency in circulation and bank reserves
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monetary base
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The ______ ________ is the ratio of the money supply to the monetary base. It indicates the total number of dollars created in the banking system by each $1 addition to the monetary base.
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money multiplier
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Bank Reserves include which of the following? I. currency in bank vaults II. bank deposits held in accounts at the Federal Reserve III. customer deposits in bank checking accounts
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I and II
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The fraction of bank deposits actually held as reserves is the _________
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reserve ratio
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Bank regulation includes which of the following? I. deposit insurance II. capital requirements III. reserve requirements
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I, II, and III
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Which of the following changes would be the most likely to reduce the size of the money multiplier? a. a decrease in the required reserve ratio b. a decrease in excess reserves c. an increase in cash holding by consumers d. a decrease in bank runs e. an increase in deposit insurance
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an increase in cash holding by consumers
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The monetary base equals ________ ?
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currency in circulation + reserves held by banks
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A _____ ____ is an institution that oversees and regulates the banking system and controls the monetary base.
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central bank
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A __________ _______ accepts deposits and is covered by deposit insurance
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commercial bank
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An _____________ _______ trades in financial assets and is not covered by deposit insurance
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investment bank
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A _______ ___ _____ (thrift) is another type of deposit-taking bank, usually specialized in issuing home loans
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savings and loan
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A financial institution engages in ________ when it finances its investment with borrowed funds
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leverage
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The _______ _____ _____ is the reduction in a firm's net worth from falling asset prices
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balance sheet effect
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A __________ ____ ___ __________ takes place when asset sales to cover losses produce negative balance sheet effects on other firms and force creditors to call in their loans, forcing sales of more assets and causing further declines in asset prices
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vicious cycle of deleveraging
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_______ _______ is lending to home buyers who don't meet the usual criteria for being able to afford their payments
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subprime lending
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In ____________ a pool of loans is assembled and shares of that pool are sold to investors
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securitization
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Which of the following contributed to the creation of the Federal Reserve System? I. The bank panic of 1907 II. the Great Depression III. The savings and loan crisis of the 1980s
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I only
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Which of the following is a part of both the Federal Reserve System and the federal Government? a. The Federal Reserve Board of Governors b. the 12 regional Federal Reserve Banks c. the Reconstruction Finance Corporation d. commercial banks e. the Treasury Department
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the Federal Reserve Board of Governors
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Which of the following is NOT a role of the Federal Reserve System? a. controlling bank reserves b. printing currency (Federal Reserve Notes) c. carrying out monetary policy d. supervising and regulating banks e. holding reserves for commercial banks
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printing currency (Federal Reserve notes)
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Who oversees the Federal Reserve System?
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the Board of Governors of the Federal Reserve System
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Which of the following contributed to the financial crisis of 2008? a. subprime lending b. securitization c. deleveraging d. low interest rates leading to a housing boom e. all of the above
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deleveraging
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The ______ _____ ______ allows banks that fall short of the reserve requirement to borrow funds from banks with excess reserves.
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federal funds market
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The _____ ____ _____ is the interest rate determined in the federal funds market.
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federal funds rate
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The __________ ____ is the interest rate the Fed charges on loans to banks.
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discount rate
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An _______-________ __________ is a purchase or sale of government debt by the Fed
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open-market operation
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Which of the following is a function of the Federal Reserve System? I. examine commercial banks II. print Federal Reserve Notes III. conduct monetary policy
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I and III only
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Which of the following financial services does the Federal Reserve provide for commercial banks? I. clearing checks II. holding reserves III. making loans
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I, II, and III
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When the Fed makes a loan to a commercial bank, it charges _________
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the discount rate
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If the Fed purchases U.S Treasury bills from a commercial bank, what happens to bank reserves and the money supply?
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Bank Reserves decrease and Money Supply decreases
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When banks make loans to each other, they charge the _______
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CD rate
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The ________ ______ ______ ______ is an estimate of what the budget balance would be if real GDP were exactly equal to potential output
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cyclically adjusted budget balance
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A _______ ____ runs from October 1 to September 30 and is labeled according to the calendar year in which it ends
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fiscal year
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______ ____ is government debt held by individuals and institutions outside the government
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Public debt
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The _______-______ _____ is the government's debt as a percentage of GDP
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debt-GDP ratio
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___________ ___________ are spending promises made by governments that are effectively a debt despite the fact that they are not included in the usual debt statistics
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implicit liabilities
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If government spending exceeds tax revenues, which of the following is necessarily true? There is a I. positive budget balance II. budget deficit III. recession
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I and II only
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The cyclically adjusted budget deficit is an estimate of what the budget balance would be if real GDP were __________________
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equal to potential output
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During a recession in the United States, what happens automatically to tax revenues and government spending?
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Tax revenues will decrease and Government spending will increase
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Which of the following is a reason to be concerned about persistent budget deficits? a. crowding out b. government default c. the opportunity cost of future interest payments d. higher interest rates leading to decreased long-run growth e. all of the above
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all of the above
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The Federal Reserve can move the interest rate through open market operations that shift the money supply curve. In practice, the Fed sets a ______ ____ ____ ____ and uses open market operations to achieve that target
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target federal funds rate
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________ _________ _________ is monetary policy that increases aggregate demand
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expansionary monetary policy
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_______ __________ _________ is monetary policy that reduces aggregate demand
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contractionary monetary policy
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The _______ _____ ____ ___________ _________ is a rule for setting the federal funds rate that takes into account both the inflation rate and the output gap
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Taylor rule for monetary policy
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________ ___________ occurs when the central bank sets an explicit target for the inflation rate and sets monetary policy in order to hit that target
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inflation targeting
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At each meeting of the Federal Open Market Committee, the Federal Reserve sets a target for which of the following? I. The federal funds rate II. the prime interest rate III. the market interest rate
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I only
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Which of the following actions can the Fed take to decrease the equilibrium interest rate? a. increase the money supply b. increase money demand c. decrease the money supply d. decrease money demand e. both (a) and (d)
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increase the money supply
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Contractionary monetary policy attempts to ________ aggregate demand by ________ interest rates.
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Decrease; increasing
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Which of the following is a goal of monetary policy? a. zero inflation b. deflation c. price stability d. increased potential output e. decreased actual real GDP
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price stability
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When implementing monetary policy, the Federal Reserve attempts to achieve ____________
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a low, but positive inflation rate
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According to the concept of ________ _________, changes in the money supply have no real effects on the economy
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monetary neutrality
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In the long run, changes in the quantity of money affect which of the following? I. Real aggregate output II. Interest rates III. the aggregate price level
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III only
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An increase in the money supply will lead to which of the following in the short run? a. higher interest rates b. decreased investment spending c. decreased consumer spending d. increased aggregate demand e. lower real GDP
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increased aggregate demand
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A 10% decrease in the money supply will change the aggregate price level in the long run by _________
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10%
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Monetary neutrality means that, in the long run, changes in the money supply _____________
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have no real effect on the economy
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A graph of percentage increases in the money supply and average annual increases in the price level for various countries provides evidence that ____________
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money is neutral in the long run
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According to the _________ _____ __ ___ ___ ______, the real quantity of money is always at its long run equilibrium level
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classical model of the price level
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An __________ ____ is a reduction in the value of money held by the public caused by inflation
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inflation tax
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________-_______ ________ is inflation that is caused by a significant increase in the price of an input with economy-wide importance
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cost-push inflation
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__________-__________ ___________ is inflation that is caused by an increase in aggregate demand
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demand-pull inflation
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The real quantity of money is: I. equal to M/P II. the money supply adjusted for inflation III. higher in the long run when the Fed buys government securities.
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I and II only
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In the classical model of the price level, a. only the short run aggregate supply curve is vertical b. both the short run and long run aggregate supply curves are vertical c. only the long run aggregate supply curve is vertical d. both the short-run aggregate demand and supply curves are vertical e. both the long-run aggregate demand and supply curves are vertical
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both the short run and long run aggregate supply curves are vertical
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The classical model of the price level is most applicable in _________
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periods of high inflation
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An inflation tax is ____________
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the result of a decrease in the value of money held by the public
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Revenue generated by the government's right to print money is known as ___________
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seignorage
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The ______-_____ _______ _____ is the negative short-run relationship between the unemployment rate and the inflation rate
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Short-Run Phillips Curve
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The _______________ ___________ _____ ____ ____________ or _______ is the unemployment rate at which inflation does not change over time
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non accelerating inflation rate of unemployment, or NAIRU
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The ____ ____ ______ _____ shows the relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience
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Long-run Phillips Curve
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_____ ________ is the reduction in aggregate demand arising from the increase in the real burden of outstanding debt caused by deflation
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debt deflation
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There is a ____ _______ on the nominal interest rate: it cannot go below zero.
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zero bound
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A ________ ___ is a situation in which conventional monetary policy is ineffective because nominal interest rates are up against the zero bound
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liquidity trap
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The Long-run Phillips curve is I. the same as the short run Phillips curve. II. vertical III. the short-run Phillips curve plus expected inflation
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II only
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The Short run Phillips Curve shows a _______ relationship between ____________
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negative relationship between unemployment and inflation
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An increase in expected inflation will shift __________
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the Short run phillips curve upward
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Bringing down inflation that has become embedded in expectations is called _________
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disinflation
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Debt deflation is ___________ a. the effect of deflation in decreasing aggregate demand. b. an idea proposed by Irving Fisher c. a contributing factor in causing the Great Depression d. due to differences in how borrowers/lenders respond to inflation losses/gains e. all of the above
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all of the above
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_______________ _______ ____________ is the use of monetary and fiscal policy to smooth out the business cycle
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Monetary policy activism
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_________ asserts that GDP will grow steadily if the money supply grows steadily
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Monetarism
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____________ _________ __________ is the use of changes in the interest rate or the money supply to stabilize the economy
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Discretionary Monetary Policy
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A ________ __________ _________ is a formula that determines the central bank's actions
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monetary policy rule
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The _________ ______ ____ _____ emphasizes the positive relationship between the price level and the money supply. It relies on the velocity equation (MxV=PxY)
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Quantity Theory of Money
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The ________ __ ________ is the ratio of nominal GDP to the money supply. It is a measure of the number of times the average dollar bill is spent per year
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velocity of money
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According to the _________ _____ __________, to avoid accelerating inflation over time, the unemployment rate must be high enough that the actual inflation rate equals the expected inflation rate.
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natural rate hypothesis
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A ________ __________ __________ results when politicians use macroeconomic policy to serve political ends
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political business cycle
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_______ __________ _____________ is an approach to the business cycle that returns to the classical view that shifts in the aggregate demand curve affect only the aggregate price level, not aggregate output
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New Classical macroeconomics
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___________ _____ is the view that individuals and firms make decisions optimally, using all available information
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Rational expectations
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According to ____ ______________ __________, market imperfections can lead to price stickiness for the economy as a whole
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new Keynesian economics
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_______ ________ _____ _______ claims that fluctuations in the rate of growth of total factor productivity cause the business cycle
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Real business cycle theory
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Which of the following was an important point emphasized in Keynes' influential work? I. In the Short run, shifts in aggregate demand affect aggregate output II. Animal spirits are an important determinant of business cycles III. in the long run we're all dead.
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I, II, and III
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Which of the following is a central point of monetarism? a. Business cycles are associated with fluctuations in money demand. b. Activist monetary policy is the best way to address business cycles. c. Discretionary monetary policy is effective while discretionary fiscal policy is not d. The Fed should not follow a monetary policy rule e. All of the above
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The Fed should not follow a monetary policy rule
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The natural rate hypothesis says that the unemployment rate should be ________
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high enough that the actual rate of inflation equals the expected rate
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The main difference between the classical model of the price level and Keynesian economics is that ___________
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the classical model assumes a vertical short-run aggregate supply curve
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That fluctuations in total factor productivity growth cause the business cycle is the main tenet of which theory?
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real business cycle
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Is expansionary monetary policy helpful in fighting recessions? (Classical)
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No
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Is expansionary monetary policy helpful in fighting recessions? (Keynesian)
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Not Very
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Is expansionary monetary policy helpful in fighting recessions? (Monetarism)
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Yes
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Is expansionary monetary policy helpful in fighting recessions? (Modern Consensus)
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Yes, except in special circumstances
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Is expansionary fiscal policy effective in fighting recessions? (Classical)
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No
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Is expansionary fiscal policy effective in fighting recessions? (Keynesian)
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Yes
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Is expansionary fiscal policy effective in fighting recessions? (Monetarism)
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No
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Is expansionary fiscal policy effective in fighting recessions? (Modern Consensus)
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Yes
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Can monetary and/or fiscal policy reduce unemployment in the long run? (Classical)
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No
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Can monetary and/or fiscal policy reduce unemployment in the long run? (Keynesian)
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Yes
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Can monetary and/or fiscal policy reduce unemployment in the long run? (Monetarism)
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No
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Can monetary and/or fiscal policy reduce unemployment in the long run? (Modern Consensus)
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No, except in special circumstances
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Should monetary policy be used in a discretionary way? (Classical)
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No
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Should monetary policy be used in a discretionary way? (Keynesian)
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Yes
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Should monetary policy be used in a discretionary way? (Monetarism)
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No
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Should monetary policy be used in a discretionary way? (Modern Consensus)
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Still in dispute
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Which of the following is an example of an opinion on which economists have reached a broad consensus? I. The natural rate hypothesis holds true. II. Discretionary fiscal policy is usually counterproductive. III. Monetary policy is effective, especially in a liquidity trap.
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I and II only
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Which of the following is stressed by supply siders? a. Taxes should be increased b. Lower taxes will lead to lower tax revenues c. It is important to increase incentives to work, save, and invest. d. The economy operates on the upward-sloping section of the Laffer curve. e. Supply side views are widely supported by empirical evidence.
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It is important to increase incentives to work, save, and invest
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Which of the following is true regarding central bank targets? a. The Fed has an explicit inflation target. b. All central banks have explicit inflation targets. c. No central banks have explicit inflation targets. d. The Fed clearly does not have an implicit inflation target. e. Economists are split regarding the need for explicit inflation targets
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Economists are split regarding the need for explicit inflation targets
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The Fed's main concerns are _____________
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inflation and unemployment
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The "clean little secret of macroeconomics" is that __________
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economists have reached a significant consensus
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A country's _________ __ __________ _______ are a summary of the country's transactions with other countries.
answer
balance of payments accounts
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A country's __________ ____ __________ ____ _____ __________ ________ or the ________ _________ is its balance of payments on goods and services plus net international transfer payments and factor income
answer
balance of payments on the current account, or the current account
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A country's ___________ __ ________ __ ______ ___ _________ is the difference between its exports and its imports during a given period
answer
balance of payments on goods and services
question
The ____________ _______ ________, or ________ ___________, is the difference between a country's exports and imports of goods
answer
merchandise trade balance, or trade balance
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A country's ____________ __ _____________ __ ____ ________ __________, or simply the _________ _________, is the difference between its sales of assets to foreigners and its purchases of assets from foreigners during a given period
answer
balance of payments on the financial account, or the financial account
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Current Account = ____________
answer
-Financial Account
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The current account includes which of the following? I. payments for goods and services II. transfer payments III. factor income
answer
I, II, and III
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The balance of payments on the current account plus the balance of payments on the financial account is equal to ________
answer
zero
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The financial account was previously known as the ___________
answer
capital account
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The trade balance includes which of the following? I. imports and exports of goods. II. imports and exports of services III. net capital flows
answer
I only
question
Which of the following will increase the demand for loanable funds in a country? a. economic growth b. decreased investment opportunities c. a recession d. decreased private savings rates e. government budget surpluses
answer
economic growth
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