According to the quantity theory, in the long run, an increase in the growth rate of ________ leads to an increase in the ________ .
real GDP; inflation rate
the quantity of money; growth rate of real GDP
the quantity of money; inflation rate
real GDP; growth rate of velocity
Demand-pull inflation starts as the:
LAS curve shifts leftward.
LAS curve shifts rightward.
AD curve shifts rightward.
AD curve shifts leftward.
A bank creates money by:
lending its excess reserves.
purchasing currency from the Federal Reserve.
buying bonds from the Federal Reserve.
printing more checks.
A bank's reserves include:
the cash in its vault plus the value of its depositors'accounts.
the cash in its vault plus its deposits held at a Federal Reserve bank.
the cash in its vault plus any gold held for the bank at Fort Knox.
its common stock holdings, the cash in its vault, and any deposits at a Federal Reserve bank.
The quantity theory of money asserts that inflation is the result of growth in:
the quantity of money.
potential GDP.
the natural rate of unemployment.
money wages.
The majority of money is created when:
banks make loans.
new coins are minted.
new bills are printed.
the Fed sells bonds.
The major role of a commercial bank is to:
make mortgage loans.
sell shares and use the proceeds to buy stocks.
receive deposits and make loans.
restrain the growth of the quantity of money.
Comparing the fiscal imbalance for the current generation versus future generations, it is the case that:
future generations pay a larger share of the fiscal imbalance.
the current generation pays a larger share of the fiscal imbalance.
each generation pays half of the fiscal imbalance.
each generation pays all of its fiscal imbalance.
A Phillips curve shows the relationship between the:
price level and real GDP.
unemployment rate and real GDP.
inflation rate and the unemployment rate.
inflation rate and real GDP.
When the interest rate rises, the:
quantity of money demanded decreases.
demand for money decreases.
demand for money increases.
quantity of money demanded increases.
A discretionary fiscal policy is a fiscal policy that:
involves a change in government defense spending.
is triggered by the state of the economy.
requires action by the Congress.
involves a change in corporate tax rates.
In the absence of a Ricardo-Barro effect, a fiscal policy that decreases government saving ________ the supply of loanable funds, ________ the real interest rate, and ________ investment.
increases; decreases; crowds out
increases; decreases; increases
decreases; increases; increases
decreases; increases; crowds out
In the short run, which of the following actions raise the interest rate?
A decrease in the demand for money
An increase in bond prices
An increase in the quantity of money
An increase in the demand for money
Fiscal policy includes:
only decisions related to government expenditure on goods and services.
only decisions related to government expenditure on goods and services and the value of transfer payments.
only decisions related to the value of transfer payments and tax revenue.
decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue.
The forces that generate economic growth are those that shift the:
long-run aggregate supply curve leftward.
long-run aggregate supply curve rightward.
aggregate demand curve leftward.
none of the above answers are correct.
The federal funds rate is the interest rate:
banks charge each other on overnight loans.
on the 3-month Treasury bill.
on the 30-year treasury bond.
also known as the prime rate.
Looking at the supply-side effects on aggregate supply shows that a tax hike on labor income:
increases the incentive to work.
decreases potential GDP.
increases potential GDP because people work more to pay the higher taxes.
Both answers A and B are correct.
In a real business cycle model, labor supply:
increases if the nominal interest rate rises.
is independent of the real interest rate.
decreases if the real interest rate rises.
decreases if the real interest rate falls.
The nation is divided into ________ Federal Reserve districts, each having a Federal Reserve Bank.
10
52
12
7
Which of the following is one of the Fed's policy goals?
Help the President win reelection
Exchange rate
Monetary base
Price level stability