Macroeconomics Questions

The​ Fed's credit policy since 2008 hasA.provided banks more liquidity.B.given private banks more time to recover from the financial crisis.C.led to an expansion of asymmetric information problems by reducing​ banls' incentive to screen and monitor borrowers.D.All of the above.

During normal economic​ times, when there is not​ "excessive" unemployment or​ inflation, discretionary fiscal policyA.is used frequently to effectively​ fine-tune the economy.B.is not used due to legal restrictions on the ability of Congress to make policy.C.is probably not very effective due to lags and the uncertainty created by repeated tax policy changes.D.is a way of effectively spurring economic growth.

Which of the following best describes the linkage between money and​ prices?A.Money and prices are not related to each other.B.Decreasesin the money supply are directly related to decreases in prices in the long run.C.Increasesin the money supply are directly related to decreases in prices in the long run.D.Decreasesin the money supply are directly related to increases in prices in the long run.

One of the advantages of fiscal policy is that itA.is able to maintain a balanced budget for the government in the long run.B.maintains the economy at full employment.C.is able to work extremely well in spite of the existence of time lags.D.generates a psyche of safety for consumers and investors because they know the government has the ability to use it.

Changes in factors of production that influence economic growth willA.shift LRAS but not SRAS.B.not shift SRAS or LRAS.C.shift SRAS but not LRAS.D.shift SRAS and LRAS.

Due to the​ Gramm-Leach-Bliley Act of 1999A.allowed European central banks to unite into the European Union Bank.B.the US government allowed commercial banks to own stock and sell insurance policies.C.the US government forbid US commercial banks to own stock of any other business domestic or foreign.D.the US government forbid US commercial banks to own stock of foreign banks and businesses.

A company issues corporate bonds to finance a new building project.Is this counted in M1​ only, M2​ only, M1 and​ M2, or​ neither?A.M2 only.B.M1 only.C.Neither M1 nor M2.D.M1 and M2.

Suppose that the rental rate of machinery increased temporarily. The result of this would be best described byA.an increasein both the​ short-run aggregate supply and​ long-run aggregate supply curves.B.an increasein the​ short-run aggregate supply curve only.C.a decreasein both the​ short-run aggregate supply and long run aggregate supply curves.D.a decreasein the​ short-run aggregate supply curve only.

correct,Concept Question 3.9Question HelpWhich of the following is a function of the Federal Reserve​ System?A.Acting as a lender of last resort to commercial banks.B.Issuing certificates of deposit and creating money market deposit accounts.C.Taking deposits of lenders to pool savings and make loans.D.Providing financing for consumer loans and mortgages.E.All of the above are functions of the Federal Reserve System.

The time between recognizing an economic problem and implementing policy to solve it is called the​ ________ time lag.A.effectB.implementationC.recognitionD.action

Determine the effect of the following discretionary fiscal policy actions on the aggregate demand curve.​(i) When there is an increase in government​ spending, aggregate demand shifts to the right.​(ii) When there is a decrease in​ taxes, aggregate demand shifts to the right.If these shifts occur​ simultaneously, the result will be​ __________ in aggregate demand.A.a crowding outB.a positive increaseC.a net increaseD.an unambiguous increase

Elisabeth gets a new credit card with a $5,000 credit limit.Is this counted in M1​ only, M2​ only, M1 and​ M2, or​ neither?A.Neither M1 nor M2.B.M1 and M2.C.M1 only.D.M2 only.

Refer to the economy shown in the graph to the right. Suppose that there is an increase in oil prices.The​ short-run effect of this change on the economy isA.a leftward shift of the AD​ curve, and​ demand-pull inflation.B.a rightward shift of the SRAS​ curve, and​ cost-push inflation.C.a rightward shift of the AD​ curve, and​ demand-pull inflation.D.a leftward shift of the SRAS​ curve, and​ cost-push inflation.E.​none; changes in prices have no effect on the economy in the short run.

How do automatic stabilizers ​work?A.When an increase in national income occurs there will be an increase in income tax collections and an increase in unemployment compensation and welfare payments muting the increase in planned expenditures that would have otherwise resulted.B.When a decline in national income occurs there will be an increase in income tax collections and an increase in unemployment compensation and welfare payments muting the reduction in planned expenditures that would have otherwise resulted.C.When an increase in national income occurs there will be a reduction in income tax collections and a decrease in unemployment compensation and welfare payments muting the reduction in planned expenditures that would have otherwise resulted.D.When a decline in national income occurs there will be a reduction in income tax collections and an increase in unemployment compensation and welfare payments muting the reduction in planned expenditures that would have otherwise resulted.

Which of the following is a true​ statement?A.The FDIC has reduced the problem of moral hazard but not the problem of adverse selection.B.The FDIC has reduced the number of depositors who have lost​ savings, but in doing​ so, has inadvertently encouraged banks to make riskier loans.C.Moral hazard is a problem that occurs before a transaction takes place when asymmetric information is a problem.D.Adverse selection occurs after a transaction has taken place in insurance markets.

In order to induce private banks to maintain substantial reserve deposits with the Federal Reserve​ banks, since 2008 the Fed hasA.raised the legal reserve ratio that the banks have to maintain.B.paid banks an interest rate that is equal to the federal funds rate.C.paid banks an interest rate that is higher than the federal funds rate on their reserves.D.paid banks an interest rate that is lower than the federal funds rate.

Which of the following is a situation of moral hazard created by the existence of the​ FDIC?A.Financial institutions seeking the protection of the FDIC are able to​ "hide" their poor practices.B.The FDIC regulates banks that do not promote the morals of​ today's society.C.The FDIC seeks to include those financial institutions that practice low risk loans.D.Financial​ institutions, with FDIC​ protection, use​ depositors' funds in riskier investment projects.

If the Fed decreases the discount​ rate, relative to the federal funds​ rate, then thisA.would cause the money supply to decrease.B.would decrease the cost of funds for institutions borrowing from the Fed.C.would increase the cost of funds for institutions borrowing from the Fed.D.would cause the required reserve ratio to increase.

When the Fed makes an open market​ purchase, the supply curve for bonds in the private market shifts to the​ ________ and the price of bonds​ ________.A.​left; increasesB.​right; decreasesC.​left; decreasesD.​right; increases

Many economists believe that the growth of the money supply isA.inversely related to the price level.B.directly related to interest rate growth.C.not related to output growth.D.positively related to the growth of real GDP.