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Exam 4
Student: ___________________________________________________________________________
Indicate the answer choice that best completes the statement or answers the question.
1. A balanced budget is present when:
2. A government spending and taxation policy to achieve macroeconomic goals is known as:
3. Expansionary fiscal policy consists of:
4. If the marginal propensity to consume (MPC) is 0.75, and if the goal is to increase real GDP by $400 million, then by how much would government spending have to change to generate this increase in real GDP?
5. To combat a recession, Keynesian fiscal policy recommends:
6. If the marginal propensity to consume (MPC) is 0.80, the value of the spending multiplier is:
7. When households' marginal propensity to consume (MPC) increases, the size of the spending multiplier:
8. The government can reduce unemployment or reduce inflation by:
9. Programs that automatically increase government spending (relative to revenue) during a recession and automatically decrease government spending (relative to revenue) during an economic boom are called:
10. Barter is the:
11. The term “near monies” refers to which of the following?
12. Which of the following defines the "unit of account" function of money?
13. Which of the following defines the "store of value" function of money?
14. Buying a cup of coffee with a dollar bill represents the use of money as a:
15. Credit cards are:
16. Which of the following assets is most liquid?
17. In the United States, the money supply (M1) consists of:
18. Which of the following compose the M2 money supply?
19. Which of the following correctly describes fractional reserve banking?
20. A bank faces a required reserve ratio of 5 percent. If the bank has $200 million of checkable deposits and $15 million of total reserves, then how large are the bank's excess reserves?
21. Which of the following is a bank liability?
22. Imagine that Odyssey National is a brand new bank, and that its required reserve ratio is 10 percent. If it accepts a $1,000 deposit, then its required reserves balance will be:
23. The required reserve ratio is the:
24. When new checkable deposits are created through loans,
25. The money multiplier equals:
26. When the required reserve ratio is 20 percent, the money multiplier is:
27. The term "open market operations" refers to the:
28. Which of the following would be most appropriate if the Federal Reserve wanted to increase the money supply in order to stimulate the economy?
29. Which of the following directs the buying and selling of U.S. government securities?
30. The demand curve for money:
31. The three functions of money are medium of exchange,
32. If the Fed expands the money supply by $1 trillion, what will happen in the money market?
33. When the Fed increases the money supply, interest rates:
34. The U.S. economy is currently producing at full-employment. President Elect Trump's plan to lower taxes will mostly likely result in:
35. The U.S. economy is currently producing at full-employment. President elect Trump's proposal to increase spending on infrastructure will most likely result in
36. If President elect Trump's election results in decreasing business and consumer confidence in the future, the most likely result will be
37. If consumer confidence increases and, as a result, aggregate demand increases, the result will be
38. If an economy is experiencing a recession, the appropriate monetary policy is to:
39. If an economy is experiencing inflation, the appropriate fiscal policy would be to
40. Which of the following policies would be recommended by policy makers, following the Classical School of thought, during a recession.
Answer Key
1. d
2. b
3. a
4. b
5. b
6. b
7. a
8. a
9. c
10. a
11. a
12. a
13. b
14. a
15. d
16. a
17. b
18. d
19. d
20. b
21. d
22. c
23. c
24. d
25. e
26. e
27. d
28. a
29. c
30. c
31. b
32. b
33. b
34. a
35. d
36. a
37. a
38. a
39. a
40. a
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