econ

Question 1

Fiat Money

Answer 1

Has No intrinsic value

Question 2

On a bank’s T account which is part of a bank’s asset

Answer 2

reserves but no deposits made by its customers

Question 3

If the federal funds rate were below the level the federal reserve had targeted the fed could move back towards its target by

Answer 3

selling bonds this selling would reduce reserves

Question 4

Things that Shift Money Supplied

Answer 4

Open Market Operations, Discount Rate, Federal Funds Rate, Reserve Requirement

Question 5

As the price level rises the value of money

Answer 5

decreases so people must hold more money to purchase goods and services.

Question 6

According to the classical dichotomy which of the following is influenced by monetary factors

Answer 6

nominal interest rates

Question 7

If when the money supply changes real output and velocity do no change then a 2 percent increase in the money supplied

Answer 7

increases the price level by 2 percent

Question 8

When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level there is an

Answer 8

excess supply of money, so the price level will rise

Question 9

Wealth is redistributed from debtors to creditors when inflation is

Answer 9

unexpectedly low

Question 10

Which of the following does purchasing power parity imply

Answer 10

The purchasing power of the dollar is the same in the US as it is in other foreign countries

Question 11

as the price level falls

Answer 11

people will want to hold less money so the interest rate falls

Question 12

as the price level rises the exchange rate

Answer 12

rises, so exports fall and imports rise

Question 13

tax cuts shift aggregate demand

Answer 13

right as do increases in government spending

Question 14

the long run aggregate supply curve shifts right if

Answer 14

technology improves

Question 15

the sticky wage theory of the short run aggregate supply curve says that when the price level rises more than expected

Answer 15

production is more profitable and employment rises

Question 16

other thins the same if the price level rises by 2% and people were expecting it to rise by 5% then some firms have

Answer 16

higher than desired prices, which depresses their sales

Question 17

an increase in the expected price level shifts the

Answer 17

short run but not the long run aggregate supply curve left

Question 18

Suppose the economy is in long run equilibrium in a short span of time there is a sharp rise in the stock market an increase in government purchases, an increases in the money supply and a decline in the value of the dollar in the short run

Answer 18

the price level and real GDP will both rise

Question 19

fo the US economy which of the following is the most important reason for the downward slope of the aggregate demand curve

Answer 19

the interest rate effect

Question 20

using the liquidity preference model when the federal reserve decreases the money supply

Answer 20

the equilibrium interest rate increases

Question 21

according to liquidity preference theory if the price level decreases then

Answer 21

the interest rate falls because money demand shifts left

Question 22

suppose that the federal reserve is concerned about the effects of falling stock prices on the economy. What would it do

Answer 22

buy bonds to lower the interest rate

Question 23

the term crowding-out effect refers to

Answer 23

the reduction in aggregate demand that results when a fiscal expansion cause the interest rate to increase

Question 24

during periods of expansion, automatic stabilizers cause government expenditures

Answer 24

to fall and taxes to rides