Upgrade to remove ads
Only $2.99/month

Chapter 15 and 16

Terms in this set (33)

price​ stability, high​ employment, economic​ growth, and stability of financial markets and institutions
The Federal​ Reserve's four goals of monetary policy are
a decrease in the money​ supply, an increase in interest​ rates, and a decrease in GDP.
Contractionary monetary policy on the part of the Fed results in
Federal Reserve takes to manage the money supply and interest rates to pursue its economic objectives.
Monetary policy refers to the actions the
negative slope because an increase in the interest rate decreases the quantity of money demanded.
The money demand curve has a
increases the opportunity cost of holding money
An increase in the interest rate
Federal​ Reserve's increasing the money supply and decreasing interest rates
Expansionary monetary policy refers to the​ ________ to increase real GDP.
federal funds rate.
The interest rate that banks charge other banks for overnight loans is the
sell bonds to investors and use the funds to purchase mortgages from banks.
To reassure investors who were unwilling to buy mortgages in the secondary​ market, the U.S. Congress used two government sponsored​ enterprises, Fannie Mae and Freddie​ Mac, to stand between investors and banks that grant mortgages. Fannie Mae and Freddie Mac
money demand to the right and increase the equilibrium interest rate
An increase in real GDP can shift
lower interest rates.
In the figure to the​ right, if the economy is at point
A​,
the appropriate monetary policy by the Federal Reserve would be to
increase.
Using the money demand and money supply​ model, an increase in money demand would cause the equilibrium interest rate to
real GDP increased
Refer to the diagram to the right. The money demand curve would move from Money
demand1
to Money
demand2
if
high​ employment; economic growth
The goals of monetary policy tend to be interrelated. For​ example, when the Fed pursues the goal of​ __________, it also can achieve the goal of​ ________________ simultaneously.
increase.
Using the money demand and money supply​ model, an open market sale of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to
C to B.
Refer to the diagram. Suppose the economy is in short run equilibrium above potential​ GDP, the unemployment rate is very​ low, and wages and prices are rising. Using the basic
AD−AS
​model, the correct Fed policy for this situation would be depicted as a movement from
the money supply and interest rates
The Federal​ Reserve's two main monetary policy targets are
Social Security and Medicare programs
Government transfer payments include which of the​ following?
government purchases.
If the economy is falling below potential real​ GDP, which of the following would be an appropriate fiscal policy to bring the economy back to​ long-run aggregate​ supply? An increase in
B to A
Refer to the diagram. An increase in taxes would be depicted as a movement from​ _______, using the basic AD−AS model.
legislation increasing funding for job retraining passed during a recession
Which of the following would not be considered an automatic​ stabilizer?
The federal government cuts taxes to stimulate the economy.
Which of the following would be classified as fiscal​ policy?
​decreases; decreases
An increase in individual income taxes​ ________ disposable​ income, which​ ________ consumption spending.
increasing government purchases or decreasing taxes.
Expansionary fiscal policy involves
the total value of U.S. Treasury bonds outstanding.
The federal government debt equals
government purchases and taxes.
Congress and the president carry out fiscal policy through changes in
federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
Fiscal policy refers to changes in
government expenditures are a component of aggregate demand.
An increase in government purchases will increase aggregate demand because
high rates of economic growth
Which of the following is an objective of fiscal​ policy?
budget deficit or surplus as a percentage of GDP
To evaluate the size of the federal budget deficit or surplus over​ time, it would be best to look at the
transfer payments.
The largest and fastest−growing category of federal government expenditures is
automatic stabilizers.
The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of
the federal​ government's expenditures must be lower than its tax revenue.
For the federal deficit to be​ lowered,
​increase; fall; rise
A recession tends to cause the federal budget deficit to​ ________ because tax revenues​ ________ and government spending on transfer payments​ _________.
YOU MIGHT ALSO LIKE...