Econ HW 6 – Flashcard

On the 45-degree line diagram, the 45-degree line shows points where Pts Earned: 0.5 real income equals real GDP. real aggregate expenditure equals C + I. real aggregate expenditure equals real GDP. real aggregate output equals the quantity produced.

If planned aggregate expenditure is less than total production, Pts Earned: 0.5 actual inventories will equal planned inventories. firms will experience an unplanned decrease in inventories. GDP will decrease. the economy is in equilibrium.

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP, then Pts Earned: 0.5 the multiplier is 0.125. the multiplier is 3.5. the multiplier is 8. the multiplier is 50.

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending, Pts Earned: 0.5 this may benefit the economy in the short run, but not in the long run. the economy will benefit in the short run and benefit by an even greater amount in the long run. the economy will benefit in the short run and benefit by an even greater amount in the long run. this may benefit the economy in the long run, but could be counterproductive in the short run

In economics, money is defined as Pts Earned: 0.5 the total value of one's assets in current prices. the total value of one's assets minus the total value of one's debts, in current prices. the total amount of salary, interest, and rental income earned during a year. any asset people generally accept in exchange for goods and services.

Commodity money Pts Earned: 0.5 has value independent of its use as money. has little to no value independent of its use as money. is backed by a valuable commodity such as gold. can be used to purchase commodities, but not services.

People hold money as opposed to financial assets because money Pts Earned: 0.5 earns interest. is perfectly liquid. earns no interest. earns a higher return than other financial assets.

The M2 measure of the money supply equals Pts Earned: 0.5 savings account balances plus small-denomination time deposits plus traveler's checks. savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares. M1 plus savings account balances plus small-denomination time deposits. M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares.

If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account, then M1 will ________ and M2 will ________. Pts Earned: 0.5 increase; increase not change; increase decrease; increase decrease; not change

Bank reserves include Pts Earned: 0.5 vault cash and deposits with the Federal Reserve. loans to bank customers and deposits with the Federal Reserve. vault cash and loans to bank customers. customer checking accounts and vault cash.

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit, Bank A's reserves immediately increase by Pts Earned: 0.5 $2,000 $8,000. $10,000. $ 50,000.

The main tool that the Federal Reserve uses to conduct monetary policy is Pts Earned: 0.5 open market operations. discount policy. setting reserve requirements. acting as the lender of last resort.

When net exports equal zero, the economy is in macroeconomic equilibrium. Pts Earned: 0.5 A. True B. False

The larger the MPC, the smaller the value of the multiplier. Pts Earned: 0.5 A. True B. False

Money will fail to serve as a medium of exchange if it ceases to be a store of value. Pts Earned: 0.5 A. True B. False