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69 terms

Macroeconomics Final

STUDY
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A decline in investment spending at each price level will
shift the aggregate demand curve to the left
What are reasons for the up-sloping aggregate supply curve in the short run?
Input costs are fixed, but output costs are variables. And Higher prices mean higher profits when input costs are fixed.
The aggregate demand curve will shift to the right when consumers expect their future incomes to...
rise
Aggregate demand will increase if consumers expect prices to ______ in the future
Escalate
An in crease in aggregate demeand assuming constant aggregate supply will result in
demand pull inflation
For any increase in aggregate demand, the resulting increase in real _____ will be small, the greater increase in the price level.
GDP
Regulations imposed on firms by the government
increase per-unit production costs and shift the aggregate supply curve to the left
Raising business taxes, shifts the
aggregate demand curve to the left
Assuming constant price levels, any initial decrease in aggregate demand results in the ______ being at full strength
Multiplier
What statements best illustrate a decrease in domestic resource prices and associated shift of the Aggregate Supply curve
The supply of available land expands shifting the AS curve rightward. A decrease in the price of steel and electronics components shifts the AS curve rightward. And substantial rise in immigration decreases wages shifting the AS cure rightward.
Investment has an effect on
Demand
Increase in interest rate will
decrease demand and supply.
When levels of GDP are raised as well as full-employment that means increased
productivity
Demand will always _________ if they think prices will ______ in the future
Increase, Escalate
The aggregate demand curve would shift to the left if
taxes were increased
An unexpected increase or decrease in asset values that results in a change in consumer spending is called the
wealth effect
tax cuts will shift the AD curve to the
right
What summarizes the effect of rising national incomes abroad on US exports
US exports rise, foreigners are encouraged to buy more US products, and US aggregate demand curve shifts to the right
Raising business taxes shifts the
aggregate demand curve to the left
Increase in investment returns will
increase supply and demand
Fiscal policy consists of
Increasing gov spending and decreasing taxes
Increase in what will give a negative GDP gap
Unemployment
what is the total accumulation of the deficit called
national debt
What makes the price level remain stuck at its old level even when aggregate demand declines
Ratchet effect
When aggregate demand increases, the price level rises. But when aggregate demand decreases, the price level tends to be inflexible. What effect does this describe?
The ratchet effect
Discretionary fiscal policy is designed to do what
Control inflation, encourage economic growth, and achieve full employment.
Total public debt is the amount of money the U.S. owes the
Treasuries
The Federal Governments way of manipulating taxes and spending to stimulate the economy and rein in inflation is called
fiscal policy
Crowding out effect is a potential flaw of
expansionary fiscal policy
Crowded out results from a expansionary fiscal policy are
Interest sensitive consumption and investment
What provides the info needed to assess discretionary policy and determine weather it is expansionary, contractionary, or neutral
Cyclically adjusted deficits
What problems of timing may arise in connection with fiscal policy
Administrative lags, recognition lags, and operational lags.
Built in stability constitutes ______________ or passive or automatic budgetary policy
Nondiscretionary
Economists agree that if the Fed decide to go with neutral fiscal policy then standardized budget and deficit or surplus of no more than 2% of GDP ________ is doing its job.
Monetary policy
Money owed to the Treasury is always
Public debt
What are some US securities
Treasury notes, bonds, and bills, also US saving bonds. But not Treasury stocks or US checking bonds.
Fiscal policy is always the
manipulation of taxes and federal spending.
Discretionary fiscal policy is designed too
encourage economic growth, control inflation, and achieve full employment.
Public borrowing drives up real interest rates and does what to private investment spending
reduces it
Which of the following is a problem that may arise in connection with fiscal policy
recognition lag
What characterize near-monies
Don not function directly as a medium of exchange, highly liquid, and can be readily converted into check-able deposits.
Cash is perfectly
liquid
When people measure the worth of various items in terms of money, money is performing the function of what?
Unit of account
The federal reserve banks deal with who
Government, commercial banks, and thrifts.
The federal reserve banks do not deal with who
The public and small businesses
The board of governors with the aid of the Federal __________ ___________ committee make the basic policy decision that provide monetary control of the US money and banking system
Open Market
Who doesn't compete with commercial banks
Federal Reserve Banks
Profit doesn't motivate who
Federal Reserve Banks
In emergency circumstances the Fed. Reserve Banks are the "______ of last resort" to the banking system.
Lender
Governments monetary authorities attempt to provide the amount of money needed for the particular volume of business activity that will promote what?
Price level stability, full employment, and economic growth. But no stock market fluctuation or commercial bank growth.
Money derives its value from its ________ relative to its utility
Scarcity
A unit of account is a function of what
money
Functions of money include
Medium of exchange, unit of account, and store of value.
Some people put there wealth in the form of ______ to buy things later
Money
How long is the terms for Chairperson and vice chairperson on the board of governors
4 years
Who selects the chairperson and vice one on the board of governors
president
How many members are on the Board of Governors
7
Money markets mutual fund companies use the combined funds of individual _________ to buy interest bearing short term credit instruments such as certificates of deposit and the US government securities
Shareholders
_______ money is the circulating debt of the Federal Reserve Banks
Paper
Are banks operating on the basis of fractional reserves and not vulnerable to panics or runs
No
Fractional reserves do not keep banks from panic
true
When a deposited check is drawn against another bank, it will _______ the reserves of that other bank
Decrease
What deposits are ignored when determining required reserves
Savings and time deposits
Actual reserves - required reserves =
Excess reserves
How much ever you deposit into the checking account that will increase 100% of the check able deposits
True
One way banks can partly reconcile profit and liquidity goals is to
lend temporary excess reserves held at the Federal reserve banks to other commercial banks overnight to earn interest.
The monetary multiplier is similar to the ___________ multiplier available to the government
Spending-income
Lending process helps
create money
US has a system of _____ ________ that was established in part to prevent bank runs
deposit insurance