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The Budget of the United States Government is officially submitted by...
The President to the Congress and contains proposals for government expenditures.
When a budget is not approved in time for continued agency operation..
a continuing resolution is frequently used
Problems with the budget process include the fact that...
1) frequently missed timetables result in continuing resolutions replacing budgets 2) budgets are frequently overly detailed 3) much of federal spending is uncontrollable 4) overlapping budget authorities exist across committees
If aggregate output is falling...
automatic stabilizers will tend to increase the size of the deficit
The federal budget deficit becomes....during recessions because....
larger; transfer payments increase and tax revenues decline
If a budget is cyclically balanced, the government should run a surplus when the economy experiences a contractionary gap.
The main source of profit for financial institutions is..
the difference between interest paid on deposits and interest received on loans
The discount rate is...
the interest rate charged by the Federal Reserve banks on loans to banking institutions
The emergence of mortgage-backed securities provided mortgage brokers with an incentive to seek out only the most credit worthy borrowers.
Banks minimize the risk of loss to depositors by...
making many different loans to different borrowers.
By holding highly liquid assets to guard against sudden large withdrawals, banks...
Suppose you bank at Bank A and you write a check to your friend, who banks at Bank B. What happens after the check clears?
Bank A's assets decrease and Bank B's assets increase
In the money and credit expansion process, when r=the required reserve ratio, the total change in checkable deposits is equal to the initial change in excess reserves...
multiplied by 1/r
The money multiplier will be...
smaller if either banks hold on to excess reserves or private citizens hold on to cash
What is not one of the procedures the Fed uses to change the money supply?
extending loans to the public
If the quantity of money supplied exceeds the quantity of money demanded...
the interest rate will fall
If the Fed wanted to stimulate the economy, it might...
lower the discount rate to increase the money supply
As a result of expansionary monetary policy,
both aggregate expenditure and aggregate demand increase
An increase in the money supply leads to...
a decline in interest rates, an increase in investment, and an increase in aggregate demand
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