Questions:
1.The change in real GDP resulting from an initial change in spending can be calculated by:
A. Dividing the multiplier by the initial change in spending
B. Dividing the initial change in spending by the multiplier
C. Multiplying the multiplier by the initial change in spending
D. Adding the initial change in spending to the multiplier
2.The simple multiplier formula assumes the following, except:
A. The economy has excess capacity and room to expand output
B. Firms will raise prices as buyers buy more of their output
C. People will spend more if they earn additional income
D. Business firms will increase production if demand for their output increases
3.In 2008, the Federal government provided tax rebate checks to taxpayers in the hope that:
A. C would shift down
B. C would shift up
C. G would shift down
D. G would shift up
4.When the Federal government provides tax rebate checks to taxpayers, as it did in 2008, the intent is to push the aggregate expenditures schedule in the economy upwards.
A. True
B. False
5.The multiplier measures the change in real GDP that results from a given change in the price level.
A. True
B. False
6.When the Federal government provides tax rebate checks to taxpayers, as it did in 2008, the intent is to push the aggregate expenditures schedule in the economy upwards.
A. True
B. False
7.In the Great Recession of 2007-2009, the sector of the economy that decreased the most was G.
A. True
B. False
8.An economy characterized by high unemployment is likely to be:
A. Experiencing a high rate of economic growth
B. Experiencing hyperinflation
C. In a recessionary expenditure gap
D. In an inflationary expenditure gap
9.A commercial bank has checkable-deposit liabilities of $500,000, reserves of $150,000, and a required reserve ratio of 20 percent. The amount by which a single commercial bank and the amount by which the banking system can increase loans are respectively:
A. $30,000 and $150,000
B. $50,000 and $250,000
C. $50,000 and $500,000
D. $100,000 and $500,000
10.Lowering the reserve ratio:
A. increases the discount rate.
B. decreases the discount rate.
C. changes required reserves to excess reserves.
D. decreases the amount of excess reserves banks must keep.
11.The economy is experiencing a low rate of economic growth and the Fed decides to pursue an expansionary money policy. Which set of actions by the Fed would be most consistent with this policy?
A. Selling government securities and lowering the discount rate
B. Selling government securities and raising the discount rate
C. Buying government securities and raising the discount rate
D. Buying government securities and lowering the discount rate
12.Inflationary pressure is a growing problem for the economy. Therefore, the Federal Reserve decides to pursue a policy to reduce the inflationary pressure. Which policy changes by the Fed would reinforce each other to achieve that objective?
A. Selling government securities and raising the discount rate
B. Selling government securities and lowering the discount rate
C. Buying government securities and lowering the discount rate
D. Buying government securities and lowering the reserve ratio
13.The Federal Reserve Banks are owned by the:
A. federal government.
B. Board of Governors.
C. U.S. Treasury.
D. member banks.
14.In the United States, all money is essentially the debt of government, commercial banks, and thrift institutions.
A. True
B. False
15.Currency and checkable deposits are:
A. debts of the Federal Reserve Banks or of financial institutions.
B. redeemable for gold and silver from the Federal Reserve System.
C. of intrinsic value that determines the relative worth of money.
D. the major components of the M3 definition of the money supply