Macroeconomics Final Exam at BU – Flashcards
54 test answers
Unlock all answers in this set
Unlock answers 54question
A college graduate using the summer following graduation to search for a job would be what type of unemployment?
answer
Frictional Unemployment
Unlock the answer
question
What does MPC stand for?
answer
Marginal Propensity to Consume
Unlock the answer
question
The size of the MPC is assumed to be what?
answer
0-1
Unlock the answer
question
The multiplier effect means that:
answer
A small change in spending can be a big change in GDP.
Unlock the answer
question
An increase in business taxes would be what kind of effect on investment?
answer
Negative.
Unlock the answer
question
A real interest rate decrease would be what kind of effect on investment?
answer
Positive.
Unlock the answer
question
If business taxes are reduced, and the real interest rate increases, then
answer
It is in determinant because one is positive and one is negative.
Unlock the answer
question
As disposable income decreases, consumption:
answer
decreases.
Unlock the answer
question
If the consumption function shifts downward, and the shift was not caused by a tax change, then the saving schedule:
answer
increases.
Unlock the answer
question
Which would shift the consumption schedule upward?
answer
1. Change in weath 2. Expectations 3. Interest Rate
Unlock the answer
question
An inverse relationship between the rate of interest and the level of:
answer
Investment that is illustrated by the demand curve.
Unlock the answer
question
What could decrease the investment demand?
answer
1. Expected Rate of Return -Operating costs, business taxes -Bad things shift it to the left
Unlock the answer
question
The greater the MPS, the
answer
1. Small the multiplier 2. Smaller the MPC
Unlock the answer
question
A private closed economy includes:
answer
households and consumers
Unlock the answer
question
The equilibrium level of GDP in a private closed economy is where:
answer
Aggregate Expenditures = Aggregate Supply (GDP)
Unlock the answer
question
An increase in the investment demand curve will shift the curve to the:
answer
Right
Unlock the answer
question
Savings are considered:
answer
Leakages.
Unlock the answer
question
Investments are considered:
answer
Injections.
Unlock the answer
question
If GDP (output) exceeds Aggregate Expenditures, then
answer
there is more saving than investment.
Unlock the answer
question
Over time, an increase in the real output and incomes of the trading partners of the U.S. will do what to international trade?
answer
increase exports and imports.
Unlock the answer
question
The amount by which an Aggregate Expenditures schedule must shift downward to eliminate demand-pull inflation and still achieve full-employment GDP is the:
answer
Inflationary Expenditure Gap
Unlock the answer
question
A rightward shift of the Aggregate Demand Curve in the very steep upper part of the up-sloping Aggregate Supply curve will:
answer
Slightly increase output and inflation.
Unlock the answer
question
The fears of unwanted price wars might explain why many firms are reluctant to:
answer
Reduce prices when a decline in demand occurs.
Unlock the answer
question
The foreign purchases effect suggests that an increase in the US price level relative to other counties will:
answer
Import more and export less.
Unlock the answer
question
What decreases Aggregate Demand?
answer
A decrease in: 1. Consumption 2. Investment 3. Government spending 4. Exports
Unlock the answer
question
A decrease in the price of capital goods will shift the:
answer
Aggregate Supply Curve to the right.
Unlock the answer
question
A decrease in the quantity of real output demanded along the aggregate demand curve is caused by:
answer
A increase in the price level.
Unlock the answer
question
Efficiency wages contributes to:
answer
1. Higher productivity 2. Reduction of per unit production
Unlock the answer
question
If Aggregate Supply is greater than Aggregate Demand:
answer
Inventories will rise.
Unlock the answer
question
Changes in taxes and government spending without explicit action by the Federal Government is known as:
answer
Non-discretionary.
Unlock the answer
question
As the economy declines, personal income tax revenue dramatically falls. This describes ow the progressive income tax system has what:
answer
Built in stability.
Unlock the answer
question
If the cyclically-adjusted budget a deficit of $100 billion and the actual budget shows a deficit of $150 billion. It can be concluded that the government is in what phase?
answer
Expansionary.
Unlock the answer
question
If the government wants to reduce consumption by $36 billion in order to reduce inflation. If the MPC is .75 by how much should the government raise taxes to achieve its objective?
answer
MPC/MPS=Tax Multiplier. SOOO you take the TM x Change Desired = Answer
Unlock the answer
question
If Congress cuts taxes to counter the effects of a severe recession, this would be in what phase:
answer
Expansionary.
Unlock the answer
question
The amount by which government expenditures exceed revenues during the YEAR is the:
answer
Deficit.
Unlock the answer
question
The purchasing power of money and the price level vary:
answer
Inversely.
Unlock the answer
question
Stabilizing a nation's price level and the purchasing power of its money can be achieved by what kind of policies?
answer
Fiscal and Monetary policy.
Unlock the answer
question
The basic policy-making body in the U.S. banking system is the:
answer
Board of Governors of the Federal Reserve.
Unlock the answer
question
The Federal Open Market Committee (FOMC) is made up of how many people?
answer
12 people.
Unlock the answer
question
Currency is circulation is a part of:
answer
M1 and M2.
Unlock the answer
question
Moral hazard was created during the financial crisis occurred because:
answer
Banks know the Federal Reserve will lend money.
Unlock the answer
question
Bank panics are not....
answer
Impossible, but not likely either.
Unlock the answer
question
If the required reserve ration is lowered, then what goes up?
answer
The Money Multiplier.
Unlock the answer
question
On a bank's balance sheet, its office building is:
answer
an asset.
Unlock the answer
question
What is one characteristic of fractional reserve banking?
answer
It's percentage of checking accounts.
Unlock the answer
question
The excess reserves of a bank are the:
answer
Reserve Ratio (RR) x Checking Deposits = Required Reserves Required Reserves - Actual Reserves = Excess Reserves
Unlock the answer
question
When a check is cleared, the bank loses:
answer
Checkable Deposits
Unlock the answer
question
Maximum checkable deposit expansion is equal to:
answer
Excess Reserves x Money Multiplier
Unlock the answer
question
If the required reserve ration is 15% and banks hold addition excess reserves equal to 5% of any new deposit, then the money multiplier is:
answer
15% x 5%
Unlock the answer
question
If a bank has checkable deposits of $400,000 and reserves of $150,000 and a required reserve ration of 25%, then how much can the bank lend and how much can the banking system lend?
answer
Reserve Ratio x Checking account
Unlock the answer
