Money functions as a store of value if it allows you to

delay purchases until you want the goods

In the aggregate expenditures model of the economy, a downward shift in aggregate expenditures can be caused by a

decrease in government spending or an increase in taxes.

Which of the following would reduce the money supply?

Commercial banks sell government bonds to the public

If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60 billion by

increasing taxes by $20 billion

Suppose the price level is fixed, the MPC is 0.8, and the GDP gap is a negative $200 billion. For full-employment output

the government should increase government expenditures by $40 billion

Which of the following would most likely shift the aggregate demand curve to the right?

an increase in stock prices that increases consumer wealth

Refer to the diagram for a private closed economy. In this economy, aggregate expenditures

increase by $2 for every $5 increase in GDP

A major advantage of the built-in or automatic stabilizers is that they

require no legislative action by Congress to be made effective.

Other things equal, a serious recession in the economies of U.S. trading partners will

depress real output and employment in the U.S. economy.

If the price level is 250 and producers supply $450 of real output,

a surplus of real output of $150 will occur.

A private closed economy includes

households and businesses, but not government or international trade

If we both have checking accounts in the same commercial bank and I write a check in your favor for $200, the bank's

balance sheet will be unchanged.

When current government expenditures exceed current tax revenues and the economy is achieving full employment,

the cyclically adjusted budget has a deficit.

Suppose that the price of each input increased from $5 to $8. The per-unit cost of production in the economy would

rise by 60 percent, and the aggregate supply curve would shift to the left.

Other things equal, if the U.S. dollar were to depreciate, the

aggregate supply curve would shift to the left.

Other things equal, a decline in investment spending caused by the interest-rate effect of a price increase is seen by

move from point a to point b in B

If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by

increasing government spending by $4 billion

Given a fixed upsloping AS curve, a rightward shift of the AD curve will

increase both the price level and real output.

Assume that G and T2 are the relevant curves, the economy is currently at A, and the full-employment GDP is B.

This economy has a(n) actual budget deficit

Which event would most likely decrease an economy's exports?

an appreciation of the nation's currency relative to foreign currencies

The change in aggregate expenditures as shown from (C + Ig + Xn1) to (C + Ig + Xn2) will produce

an inflationary expenditure gap if 0B is the full-employment level of GDP.

The foreign purchases, interest rate, and real-balances effects explain why the

aggregate demand curve is downward sloping

The value of money varies

inversely with the price level.

Graphically, demand-pull inflation is shown as a

rightward shift of the AD curve along an upsloping AS curve.

In a private closed economy, when aggregate expenditures equal GDP,

planned investment equals saving.

Which of the following fiscal policy changes would be the most expansionary?

a $40 billion increase in government spending

The public debt is the amount of money that

the federal government owes to holders of U.S. securities

Which of the following is not part of the M2 money supply?

large-denominated time deposits

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Macro Review Ch 11-15

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Answers

1
Money functions as a store of value if it allows you to
make exchanges in a more efficient manner
measure the value of goods in a reliable way
delay purchases until you want the goods
delay purchases until you want the goods
2
In the aggregate expenditures model of the economy, a downward shift in aggregate expenditures can be caused by a
decrease in saving or an increase in government spending.
decrease in government spending or an increase in taxes.
decrease in taxes or an increase in government spending
decrease in interest rates or a decrease in taxes.
3
Which of the following would not shift the aggregate supply curve?
a decline in business taxes
an increase in labor productivity
a decline in the price of imported oil
an increase in the price level
4
Which of the following would reduce the money supply?
Commercial banks use excess reserves to buy treasury bonds from the public
A check clears from Bank A to Bank B.
Commercial banks sell government bonds to the public
Commercial banks loan out excess reserves
5
The multiple by which the commercial banking system can expand the supply of money is equal to the reciprocal of
the MPS
the reserve ratio.
its excess reserves
its actual reserves
6
If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60 billion by
reducing government expenditures by $60 billion
increasing taxes by $15 billion.
reducing government expenditures by $12 billion
increasing taxes by $20 billion
7
Suppose the price level is fixed, the MPC is 0.8, and the GDP gap is a negative $200 billion. For full-employment output
the government should increase government expenditures by $200 billion
the government should reduce taxes by $160 billion
the government should reduce taxes by $200 billion
the government should increase government expenditures by $40 billion
8
Currency in circulation is part of
M1 only.
neither M1 nor M2
both M1 and M2.
M2 only.
9
Which of the following would most likely shift the aggregate demand curve to the right?
increased fear that a recession will cause workers to lose their jobs
an increase in stock prices that increases consumer wealth
an increase in personal income tax rates
a reduction in household borrowing because of tighter lending practices
10
Refer to the diagram for a private closed economy. In this economy, aggregate expenditures
do not change as GDP increases.
increase by $2 for every $4 increase in GDP
increase by $2 for every $5 increase in GDP
increase by $2 for every $5 increase in GDP
11
If gross investment is $10 at all levels of GDP, the equilibrium GDP will be
$220
$300
$180
$260
12
A rightward shift in the aggregate supply curve is best explained by an increase in
the price of imported resources.
business taxes.
productivity.
nominal wages.
13
An increase in productivity will
decrease aggregate supply and aggregate demand.
increase aggregate supply and aggregate demand
increase aggregate supply.
increase aggregate demand
14
What is the MPS for this economy?
0.7
0.6
0.4
0.3
15
The public debt for the economy is
$400 billion
$540 billion
$580 billion
$460 billion
16
A major advantage of the built-in or automatic stabilizers is that they
require no legislative action by Congress to be made effective.
guarantee that the federal budget will be balanced over the business cycle
both stabilize the economy and reduce the absolute size of the public debt
automatically produce surplus during recessions and deficits in inflations
17
Other things equal, a serious recession in the economies of U.S. trading partners will
depress real output and employment in the U.S. economy.
stimulate real output and employment in the U.S. economy.
have no perceptible impact on the U.S. economy.
cause inflation in the U.S. economy.
18
If the price level is 250 and producers supply $450 of real output,
a surplus of real output of $150 will occur.
neither a shortage nor a surplus of real output will occur.
a shortage of real output of $150 will occur.
a shortage of real output of $100 will occur.
19
A private closed economy includes
households only
households and businesses, but not government or international trade
households, businesses and international trade but not government
households, businesses, and government but not international trade
20
If we both have checking accounts in the same commercial bank and I write a check in your favor for $200, the bank's
reserves and checkable deposits will both decline by $200.
liabilities will decline by $200 but its net worth will increase by $200
assets and liabilities will both decline by $200
balance sheet will be unchanged.
21
When current government expenditures exceed current tax revenues and the economy is achieving full employment,
fiscal policy is contractionary.
the cyclically adjusted budget has a surplus.
the cyclically adjusted budget has a deficit.
the cyclically adjusted budget has neither a deficit nor a surplus.
22
Suppose that the price of each input increased from $5 to $8. The per-unit cost of production in the economy would
fall by $1.50, and the aggregate demand curve would shift to the right.
rise by 60 percent, and the aggregate demand curve would shift to the left.
rise by $1.50, and the aggregate supply curve would shift to the right.
rise by 60 percent, and the aggregate supply curve would shift to the left.
23
The level of aggregate expenditures in a mixed open economy consists of
Ca + Ig + G + T + Xn
Ca + Ig + Xn.
Ca + Ig + Xn + G.
Ca + G.
24
If the MPC in an economy is 0.75, a $1 billion increase in taxes will ultimately reduce consumption by
$0.75 billion
$1 billion.
$4 billion
$3 billion.
25
If the price of each input is $5, the per-unit cost of production in the economy is
$2.50
$5
$2.75
$0.40
26
The size of the multiplier associated with an initial increase in spending will be
zero if any increase in the price level occurs
the same whether or not inflation occurs.
diminished if inflation occurs
enhanced if inflation occurs
27
Discretionary fiscal policy designed to slow the economy is illustrated by
a movement from a to c along curve T2.
the shift of curve T1 to T2
a movement from d to b along curve T1.
the shift of curve T2 to T1
28
Other things equal, if the U.S. dollar were to depreciate, the
aggregate supply curve would shift to the right.
aggregate supply curve would shift to the left.
aggregate demand curve would remain fixed in place.
aggregate demand curve would shift to the left
29
If you place a part of your summer earnings in a savings account, you are using money primarily as a
store of value
standard of value
medium of exchange
unit of account
30
Other things equal, a decline in investment spending caused by the interest-rate effect of a price increase is seen by
shift of the AS curve in B
move from point a to point b in B
shift of the AD curve in A
move from point a to point c in C
31
If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by
increasing taxes by $4 billion
increasing government spending by $40 billion
decreasing taxes by $4 billion.
increasing government spending by $4 billion
32
Given a fixed upsloping AS curve, a rightward shift of the AD curve will
cause cost-push inflation
increase the price level but not real output
increase real output but not the price level
increase both the price level and real output.
33
If gross investment is $12 billion, the equilibrium level of GDP will be
$370
$360
$350
$380
34
Assume that G and T2 are the relevant curves, the economy is currently at A, and the full-employment GDP is B.
This economy has a(n) actual budget deficit
This economy has a(n) cyclically adjusted budget surplus
This economy has a(n) cyclically adjusted budget deficit.
This economy has a(n) actual budget surplus.
35
Which event would most likely decrease an economy's exports?
an appreciation of the nation's currency relative to foreign currencies
a depreciation of the nation's currency relative to foreign currencies
a decline in the tariff on products imported from abroad
a decline in the tariff on products imported from abroad
36
The change in aggregate expenditures as shown from (C + Ig + Xn1) to (C + Ig + Xn2) will produce
a decrease in real GDP.
an inflationary expenditure gap if 0D is the full-employment level of GDP.
an increase in real GDP if 0A is this nation's full-employment level of GDP
an inflationary expenditure gap if 0B is the full-employment level of GDP.
37
The foreign purchases, interest rate, and real-balances effects explain why the
aggregate demand curve is downward sloping
economy will adjust toward equilibrium
aggregate expenditures schedule may shift up or down
aggregate demand curve may shift to the left or right
38
What is the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?
a rise in the real GDP
The federal budget will automatically move toward a deficit
an unintended accumulation of inventories by businesses
a decline in the rate of interest
39
Other things equal, an increase in investment spending is depicted by
C
B and C
B
A
40
The value of money varies
directly with the interest rate
inversely with the price level.
directly with the price level
directly with the volume of employment
41
When government spending is increased, the amount of the increase in aggregate demand primarily depends on
exchange rates.
the average propensity to consume
the size of the multiplier
income taxes
42
Graphically, demand-pull inflation is shown as a
rightward shift of the AD curve along a downsloping AS curve.
leftward shift of the AS curve along an upsloping AD curve.
leftward shift of the AS curve along a downsloping AD curve.
rightward shift of the AD curve along an upsloping AS curve.
43
In a private closed economy, when aggregate expenditures equal GDP,
disposable income equals consumption minus saving.
consumption equals aggregate expenditures.
consumption equals investment.
planned investment equals saving.
44
Which of the following fiscal policy changes would be the most expansionary?
a $10 billion tax cut and $30 billion increase in government spending
a $40 billion tax cut
a $20 billion tax cut and $20 billion increase in government spending
a $40 billion increase in government spending
45
Most modern banking systems are based on
commodity money
100 percent reserves
fractional reserves
money of intrinsic value
46
The public debt is the amount of money that
the federal government owes to taxpayers
the federal government owes to holders of U.S. securities
state and local governments owe to the federal government
Americans owe to foreigners
47
If at some level of GDP the economy is experiencing an unintended decrease in inventories,
domestic output will increase.
the business sector will lay off workers.
the price level will fall.
the aggregate level of saving will decline
48
A decrease in government spending will cause a(n)
increase in the quantity of real output demanded
decrease in aggregate demand
decrease in the quantity of real output demanded.
increase in aggregate demand
49
Which of the following is not part of the M2 money supply?
money market deposit accounts
large-denominated time deposits
money market mutual fund balances
currency
50
The size of the M2 money supply is
$5,699 billion.
$4,720 billion
$2,833 billion
$6,744 billion

Macro Review Ch 11-15 Flashcards | StudBud