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70 terms

Macro final

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comparative advantage
countries engaged in international trade specialize in production based on
mutually advantageous specialization and trade between A and B may still be possible
If country A can produce both goods X and Y more efficiently, that is, with smaller absolute amounts of resources, than can country B
the federal government
fiscal policy is carried out primarily by
changes in taxes and government expenditures made by congress to stabilize the economy
discretionary fiscal policy refers to
deficits during recessions and surpluses during periods of demand-pull inflation
countercyclical discretionary fiscal policy calls for
manipulation of government spending and taxes to stabilize domestic output, employment, and the price level
fiscal policy refers to
involves specific changes in T and G undertaken expressly for stabilization at the option of congress
discretionary fiscal policy is so named because it
is designed to expand real GDP
Expansionary fiscal policy is so named because it
is expressly designed to contract real GDP
contractionary fiscal policy is so named because it
tax cuts during recession and reduction is government spending during inflation
an economist who favors smaller government would recommend
the deficits are incurred during recessions and surpluses during inflations
discretionary fiscal policy will stabilize the economy most when
increase tax rates and/or reduce government spending
in a certain year the aggregate amountt demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $ 20 billion of governmnet purchases. Full-Employment GDP is 120 billion. to obtain price level stability under these conditions the government should
an excess of government expenditures over tax receipts
assume the economy is at full-employment and that investment spending declines dramatically. if the goal is to restore full employment, government fiscal policy should be directed toward
reduce tax rates and/or increase government spending
in a certain year the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full employment GDP is $200 billion. to obtain full employment under these conditions the government should
a decrease in tax rates
an appropriate fiscal policy for a severe recession
a tax rate increase
an appropriate fiscal policy for severe demand-pull inflation
federal reserve banks
paper money (currency) in the united states is issued by the
federal reserve system
In the U.S. economy the money supply is controlled by the
federal open market committee
as it relates to Federal Reserve activities, the acronym FOMC describes the
deposit insurance
which one of the following is presently a major deterrent to bank panics in the united states
fractional reserves
most modern banking systems are based on
is susceptible to bank panics
a fractional reserve bank
banks can create money through the lending process
in a fractional reserve bank system
$5,000
a reserve requirement of 20 percent means a bank must have $1,000 of reserves if its checkable deposits are
vertical and the short-run aggregate supply curve is upward sloping
the long-run aggregate supply curves is
nominal wages and other input prices are fully responsive to price-level changes
in terms of aggregate supply, the difference between the long run and the short run is that in the long run
higher price levels create incentives to expand output when resources prices are unresponsive to price-level changes
the short-run aggregate supply curve is upsloping because
nominal wages and other input prices change
other things equal, the short-run aggregate supply curve shifts positions when
the level of real output is the same in the long run regardless of the location of the aggregate demand curve
in the aggregate demand-aggregate supply model
an increase in inflation accompanied by decreases in real output and employment
Stagflation refers to
a dramatic increase in oil prices
which of the following allegedly contributed to the stagflation in the mid 1970's
increase the realized rate of economic growth
the achievement of full employment through time will
outward shift of the production possibilities curve
economic growth can be portrayed as a
neither ensures a nation of an increase in real GDP nor of an increase in real GDP per capita
an outward shift of a nation's production possibilities curve
whatever performs the functions of money extremely well is considered to be money
to say money is socially defined means that
a store of value, a unit of account, and a medium of exchange
money functions as
a unit of account
if you are estimating your total expenses for school next semester, you are using money primarily as
store of value
if you place a part of your summer earnings in a savings account, you are using money primarily as a
a medium of exchange
if you write a check on a bank to purchase a used honda civic, you are using money primarily as
unit of account
a $70 price tag on a sweater in a department store window is an example of money functioning as a
the seven member of the board of governors of the federal reserve system along with the president of the NY federal reserve bank and four other Federal Reserve banks presidents on a rotating basis
the Federal Open Market Committee (FOMC) is make up of
Federal Open Market Committee (FOMC)
the group that sets the federal reserve systems policy on buying and selling government securities (bills, notes and bonds) is the
difference between actual reserves and required reserves
excess reserves refer to the
federal funds rate
overnight loans from one bank to another for reserve purposes entail an interest rate called the
borrowing funds in the federal funds market
a bank temporarily short of required reserves may be able to remedy this situation by
federal funds market
the market for immediately available reserve balances at the federal reserve is known as the
m = 1/R
if m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio, then for the banking system
D= E x m
if D equals the maximum amount of new demand-deposit money that can be created by the banking system on the basis of any given amount of excess reserves; E equals the amount of excess reserves; and m is the monetary multiplier then
5
if the reserve ration is 15 percent and commercail bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired checkable deposits, then the relevant monetary multiplier for the banking system will be
higher interest rates, a contracted GDP, and appreciation of the dollar
if the Fed were to increase the legal reserve ration, we would expect
raise the legal reserve ratio
if the monetary authorities want to reduce the monetary multiplier, they should
1
if the reserve ration is 100 percent, the value of the monetary multiplier is
the FDIC insures bank deposits and therefore depositors do not panic and rush to withdraw money when individual banks have financial problems
which of the following represents a change in todays banking policies that should prevent a recurrence of the bank panics of 1930-1933
the widespread conversion of checkable deposits to cash by the public
the bank panics of 1930-1933 and the resulting failures of many banks were caused by
rate at which the federal reserve banks lend to commercial banks
the discount rate is the interest
borrowing from a federal reserve bank
a commercial bank can add to its actual reserves by
federal funds rate
the interest rate at which the Federal Reserve Banks lend to commercial banks is called the
Federal Reserve Banks lend to commercial banks
the discount rate is the rate of interest at which
discount rate
projecting that it might temporarily fall short of legally required reserves in the coming days, the bank of beano decides to borrow money from its regional Federal Reserve Bank. the interest rate on the loan is called the
increases its reserves and enhances its ability to extend credit to bank customers
when the fed lends money to a commercial bank, the bank...
less important than open-market operations in implementing monetary policy
changes in the discount rate are ...
consists of the historical accumulation of all Federal government deficits less surpluses
the U.S. public debt
the federal government owes to holders of U.S. securities
the public debt is the amount of money that
treasury bills, treasury notes, treasury bonds, and U.S. savings bonds
the public debt is held as
producing a higher rate of inflation than people expect
government can push the unemployment rate below the natural rate only by
vertical
classical theory sees the aggregate supply curve as being
reduce the price level, but not the levels of output and employment
in classical theory a decline in aggregate demand will
the real output is unrelated to the price level
the classical aggregate supply curve suggests that
Keynesian ideas
the mainstream view of macroeconomic instability is based mainly on
monetary value of all final goods and services produced within a nation in a particular year
the GDP is the