Econ Exam 3

Consider a fractional reserve banking system with a legally required reserve-depositratio of M. Suppose that an individual deposits X dollars in one bank. If every individualwho receives a loan then deposits it, then, the economy wide change in total deposits
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Consider a fractional reserve banking system with a legally required reserve-depositratio of M. Suppose that an individual deposits X dollars in one bank. If every individualwho receives a loan then deposits it, then, the economy wide change in total deposits
Will be at most X/M
What is the defining characteristic of money?
Medium of exchange
The major increase in M1 in the US in 2020 was due mainly to
A reclassification of M1 by the statistical agencies
Money is a good store of value since you can always spend it in the future.
False
When we say banks insure against consumption risk of savers, we mean which of thefollowing:
Banks ensure that savers can withdraw money if they need to
Which of the following is not a part of the Federal Reserve System
Federal Deposit Insurance Corporation (FDIC)
Oil prices rise from a war
P increases, Y decreases in the short run
A major income tax cut is passed, and Ricardian equivalence does not hold
P increases, Y increases in the short run
A major income tax cut is passed, and Ricardian equivalence does hold
P unchanged, Y unchanged
Now consider the long-run effects of an oil price rise
P increases, Y unchanged in the long run
Which of the following best describes aggregate supply?A schedule indicating the level of real output that will be produced at each possibleprice levelA change in which of the following will cause the aggregate demand curve to shift?Consumer wealthThe short-run aggregate supply curve will shift to the right whenprices of inputs decreaseWhen the Fed purchases Treasury bills, that shifts the ______ curve of money reserves and_______ interest ratesSupply, lowersWhen the Fed sells Treasury bills, that shifts the ______ curve of money reserves and_______ interest rates.Supply, raisesWhen the Fed lowers interest rates of reserve balances held at the Fed, that shifts the______ curve of in the federal funds market and, through arbitrage, _______ interest ratesDemand, lowersWhen the Fed raises interest rates of reserve balances held at the Fed, that shifts the______ curve of in the federal funds market and, through arbitrage, _______ interest rates.Demand, raisesAccording to Ricardian equivalence, why might people choose to save tax cuts?They expect matching tax increases in the future.To the extent that Ricardian equivalence holds, what is one result of it?Tax cuts are less effective at affecting AD.The classical dichotomy refers to the separation ofreal and nominal variables.