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ECON 201-Second Hour Exam Practice Test 2
Macroeconomics ECON 201
Terms in this set (31)
It is true that a stable economy occurs when
total planned leakages from the circular flow are exactly equal to total planned injections into the circular flow.
In the simple circular flow of income, whenever planned investment is equal to planned saving,
prices and total output tend to be stable.
An increase in planned savings, all else held constant, will always result in
a slowdown in the circular flow of income.
According to the simple circular flow concept, whenever planned investment is greater than planned saving during a period of less than full employment, there is a tendency for
employment to increase.
According to the simple circular flow concept, whenever planned investment is greater than planned saving during periods of full employment, there is a tendency for
prices to rise.
Whenever exports equal imports (and other planned injections equal other planned leakages), the economy
Whenever exports exceed imports (and other planned injections equal other planned leakeges), the economy
If planned investment exceeds planned savings, a deficit budget exists, and the economy is in a state of less than full employment, the most likely result is
an increase in total income and output.
In the circular flow, if government spending is greater than taxes (while other planned injections equal other planned leakage), then
the size of the income flow will increase.
Consider an economy that is operating at less than full employment. Suppose that total resource income equals $400,000 of which $350,000 is used for consumption spending and $50,000 is saved. If planned investments is $25,000, what is most likely to occur?
Inventories will accumulate.
If the money supply is $350 and PQ is $1,400, according to the quantity theory of money, velocity of money is
The bulk of the M1 money supply is made up of
The amount of money a bank can lend
is inversely related to its reserve requirements.
If a bank has $60,000 in legal reserves and is subject to a 10% reserve requirement, it could have outstanding checkable deposits to the extent of
If a $1,000 cash deposit is made in a bank where the reserve requirement is 10%, then the maximum total loans in the form of checkable deposits that may be made as a result of that cash deposit is
The higher the reserve requirement
the less the money supply can expend.
According to the equation of exchange, if total output and velocity are constant, a 20% increase in the money supply leads to
a 20% increase in price level.
The present membership in the Federal Reserve System includes
less than half of the commercial banks in the nation.
When the Fed conducts open-market operations, it primarily uses
If the Federal Open Market Committee desired to tighten credit, it would
sell securities in the open market.
If the Fed buys securities on the open market, this will
increase banks' excess reserves.
What action by the Fed would increase the level of total bank reserves?
Buying securities from individuals or businesses.
If a commercial bank is short of revenues, it can obtain funds by
Recalling loans, Borrowing from another commercial bank, Borrowing from its Federal Reserve Bank.
Which of the following tend to be at a disadvantage in periods of rising prices?
People with fixed incomes.
During a period of unemployment, a deficit budget will most likely have which of the following effects on business activity?
Increase total outpu.
If a new cash deposit creates excess reserves of $5,000 and the require reserve ratio is 10%, the banking system can increase the money supply by a maximum of
If a Federal Reserve Bank wanted to tighten the money supply, it would
Raise the discount rate.
Inventory accumulation occurs whenever
output exceeds spending.
If the Federal Reserve wanted to tighten the money supply, the most powerful combination of actions would be to
Raise reserve requirements, raise the discount rate, and sell government securities.
In a period of full employment, if M increase and V remains constant, the most likely result is?
An increase in the Value of P.
In a price index, the quantity of goods and services being measured between two periods
Must be held constant.
THIS SET IS OFTEN IN FOLDERS WITH...
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