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exam three - Flashcards

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Class:ECON 2006 - Principles of Economics
Subject:Economics
University:Virginia Polytechnic Institute And State University
Term:Spring 2010
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      Mode:   CARDS LIST       ? pages   PRINT EXIT
On a bank's balance sheet, the value of its assets must equal liabilities plus net worth
Which of the following might be considered the most contractionary set of fiscal policies? decrease in government purchases, increase in taxes, and decrease in transfer payments
When the expected price level falls below the actual price level, firms increase production in the short run
A decrease in net taxes raises aggregate expenditure by raising disposable income, thereby increasing consumption
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As an expansionary gap is closed in the long run by firms' actions, output decreases and the price level increases
If the actual price level in Exhibit 11-2 exceeds the expected price level, then equilibrium output might be Y3 in the short run
In Exhibit 11-2, if P1 is the prevailing price level, then the expected price level is the same as the actual price level
Gresham's Law states that people spend lower-quality money and hoard higher-quality money
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the MPC equals 0.75 and G increases by $100, real GDP demanded will increase by $400
In Exhibit 11-6, long-run equilibrium would be established by an increase in short-run aggregate supply to remove the contractionary gap
Assume autonomous net taxes fall by $300; the MPC = 2/3. Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed. The value of the spending multiplier equals 3
Aggregate supply expresses the relationship between the price level in the economy and the aggregate output firms will produce, other things constant
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The discount rate is the interest rate charged by the Federal Reserve banks on loans to banking institutions
When a customer deposits $100 into a checking account, the effect is to increase both the bank's liabilities and its assets
increase the money supply, the Fed might decrease the reserve requirement and buy bonds on the open market
If an economy is at its potential output level, which of the following is not true? The price level is zero.
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All of the following are variables that can be manipulated to affect fiscal policy except one. Which is the exception? the interest rate
In the long run, a decrease in aggregate demand will cause a(n) decrease in the price level and no change in output
Banks earn a profit on the difference between interest charged on loans and interest paid on deposits
Open-market operations involve the Fed's purchase and sale of government securities
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If the required reserve ratio is 0.2, and the Fed buys $3,000 of U.S. government securities, the maximum amount by which the money supply can increase is d. $15,000
Potential output is the amount produced when firms' and workers' expectations about the price level are realized
Federal budget deficits grow during recessions because tax revenues decrease while transfer payments increase
Which of the following government policies would increase aggregate demand? a deficit in the government budget
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If the MPC is 0.75, a decrease in net taxes of $100 billion will increase the equilibrium level of real GDP by $300 billion
If the actual price level exceeds the expected price level reflected in long-term contracts unemployment will decrease
If the price level rises by 4 percent and the nominal wage rises 6 percent, the real wage rises by 2 percent
Which of the following make up the money supply as it is most narrowly defined? coins and currency held by the nonbank public, checking deposits, and traveler's checks
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The higher the required reserve ratio, the smaller the money multiplier
Suppose that a bank has $6,000 in checkable deposits and the required reserve ratio is 0.2. If the bank wishes to hold no excess reserves, its actual reserves will be b. $1,200
Which of the following is not a function of money? to provide a double coincidence of wants
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 On a bank's balance sheet, the value of its assets must equalliabilities plus net worth
 Which of the following might be considered the most contractionary set of fiscal policies?decrease in government purchases, increase in taxes, and decrease in transfer payments
 When the expected price level falls below the actual price level, firmsincrease production in the short run
 A decrease in net taxesraises aggregate expenditure by raising disposable income, thereby increasing consumption
 As an expansionary gap is closed in the long run by firms' actions,output decreases and the price level increases
 If the actual price level in Exhibit 11-2 exceeds the expected price level, thenequilibrium output might be Y3 in the short run
 In Exhibit 11-2, if P1 is the prevailing price level, thenthe expected price level is the same as the actual price level
 Gresham's Law states that peoplespend lower-quality money and hoard higher-quality money
 the MPC equals 0.75 and G increases by $100, real GDP demanded will increase by$400
 In Exhibit 11-6, long-run equilibrium would be established by an increase in short-run aggregate supply to remove the contractionary gap
 Assume autonomous net taxes fall by $300; the MPC = 2/3. Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed. The value of the spending multiplier equals3
 Aggregate supply expresses the relationship betweenthe price level in the economy and the aggregate output firms will produce, other things constant
 The discount rate isthe interest rate charged by the Federal Reserve banks on loans to banking institutions
 When a customer deposits $100 into a checking account, the effect is toincrease both the bank's liabilities and its assets
 increase the money supply, the Fed mightdecrease the reserve requirement and buy bonds on the open market
 If an economy is at its potential output level, which of the following is not true?The price level is zero.
 All of the following are variables that can be manipulated to affect fiscal policy except one. Which is the exception?the interest rate
 In the long run, a decrease in aggregate demand will cause a(n)decrease in the price level and no change in output
 Banks earn a profit on the difference betweeninterest charged on loans and interest paid on deposits
 Open-market operations involvethe Fed's purchase and sale of government securities
 If the required reserve ratio is 0.2, and the Fed buys $3,000 of U.S. government securities, the maximum amount by which the money supply can increase isd. $15,000
 Potential output is the amount produced whenfirms' and workers' expectations about the price level are realized
 Federal budget deficits grow during recessions becausetax revenues decrease while transfer payments increase
 Which of the following government policies would increase aggregate demand?a deficit in the government budget
 If the MPC is 0.75, a decrease in net taxes of $100 billion will increase the equilibrium level of real GDP by$300 billion
 If the actual price level exceeds the expected price level reflected in long-term contractsunemployment will decrease
 If the price level rises by 4 percent and the nominal wage rises 6 percent, the real wagerises by 2 percent
 Which of the following make up the money supply as it is most narrowly defined?coins and currency held by the nonbank public, checking deposits, and traveler's checks
 The higher the required reserve ratio,the smaller the money multiplier
 Suppose that a bank has $6,000 in checkable deposits and the required reserve ratio is 0.2. If the bank wishes to hold no excess reserves, its actual reserves will beb. $1,200
 Which of the following is not a function of money?to provide a double coincidence of wants
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