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Practice Milestone 3

Terms in this set (23)

Which of the following is true about how the government finances its expenditures?
The U.S. Treasury sells an IOU to be paid back at a later date.
Which statement describes expansionary fiscal policy?
This is when government expenditures exceed tax revenues.
Which of the following is a broad goal of the Fed's monetary policy?
To promote maximum sustainable employment
If the reserve requirement for a bank is 12.5%, then $70 of M0 will lead to which of the following amounts of M1?
$560
Which condition would have a positive effect on economic growth?
A country adopts new technologies which increase its ability to produce more goods and services
Individual purchases: 300 billion
Government purchases: 750 billion
Business investments: 500 billion
Imports: 200 billion
Exports: 150 billion
Using the expenditure approach and the information provided here, the calculated GDP is which of the following?
1.5 trillion
Which of these forms of money has an M2 level of liquidity?
Money market mutual funds
Which of the following describes economic conditions that the Fed is aiming to achieve through its policies?
Prices are stable, and the inflation rate is around 2%.
Which of the following is NOT a reason why gold is often used as money?
It is easier to trade than paper.
Which of the following is an example of medium of exchange?
A person trades an egg farmer four seashells for one dozen eggs.
What does the equation (Y - (C +T) + (T -G)) represent?
Public savings
Which statement below about the Federal Reserve is false?
The president is the head of the Federal Reserve.
If the MPC is 0.80 and the government increase spending by $100 billion, which of the following will be the effect this change has on the economy?
It will increase the economy by $500 billion.
The amount that the Fed charges a bank for borrowing money from the Fed to meet its reserves requirement at the end of the day is known which of the following?
Discount rate
Which of the following is the main advantage of a central bank?
The value of the currency is more certain.
The term for when many bank account holders demand their money at the same time is a __________.
run
Which statement is true whether the Fed has an easy money policy or a tight money policy?
The Fed uses open market operations to influence the money supply.
Which situation is typical of a system with a decentralized banking system (such as the U.S. used during the 19th century)?
Currency printed by an unknown bank has an uncertain value.
Determine which statement regarding contractionary policy is true.
It was put in place in the late 1970s, when interest rates were very high.
Which of the following is NOT a trait of budget deficits?
They occur when tax revenue exceeds government expenditures.
Which statement regarding the Federal Reserve is true?
Private banks hold their reserves at Regional Federal Reserve branches.
Which of the following steps comes first in the federal funds market?
The Fed sets a reserve requirement for banks.
With the use of a central bank, which of the following becomes less and less important over time?
The gold standard
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