Econ 102 - Principles of Macroeconomics » Winter 2021 » Exam 3

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Question #1
The Federal Reserve does all of the following except
A.   lender of last resort
B.   keeps financial system stable
C.   collect taxes
D.   sets the reserve requirement
Question #2
When a larger percentage of income is taken from low-income people than from high-income people, this is called a(n)
A.   progressive tax
B.   regressive tax
C.   sin tax
D.   excise tax
Question #3
When the inflation rate changes from 7% to 5%, this is an example of
A.   disinflation
B.   stagflation
C.   deflation
D.   inflation
Question #4
Why is inflation harmful to some people?
A.   when wages do not keep up with inflation, people's purchasing power increases
B.   when wages do not keep up with inflation, people's purchasing power declines
C.   people are able to purchase more when inflation rises
D.   when wages keep up with inflation, people's purchasing power declines
Question #5
The Federal Reserve raises the discount rate. This leads to
A.   contractionary monetary policy
B.   expansionary monetary policy
C.   expansionary fiscal policy
D.   contractionary fiscal policy
Question #6
When an asset can be exchanged at a later time, this describes what function of money?
A.   medium of exchange
B.   unit of account
C.   purchasing power
D.   store of value
Question #7
The Federal Reserve uses expansionary monetary policy to
A.   fight high inflation
B.   punish ordinary citizens
C.   recover from a recession
D.   prevent hyperinflation
Question #8
The Federal Reserve purchases $600,000 in government bonds. The reserve requirement is 25%. How much money is created?
A.   $3,000,000
B.   $15,000,000
C.   $6,000,000
D.   $2,400,000
Question #9
Contractionary fiscal policy is used to
A.   raise price levels
B.   stimulate the economy
C.   lower price levels
D.   promote GDP growth
Question #10
Babe Ruth's salary was $80,000 in 1931. CPI for 2020 = 202, CPI for 1931 = 12.4. What would that be worth today?
A.   $1,303,225.81
B.   $16,160,000
C.   $4,910.89
D.   $992,000
Question #11
If the Federal Reserve lowers the reserve requirement, this will
A.   lower the money multiplier and decrease the money supply
B.   raise the money multiplier and increase the money supply
C.   raise the money multiplier and decrease the money supply
D.   lower the money multiplier and increase the money supply
Question #12
Credit cards are in which money supply?
A.   M2 only
B.   M1 and M2
C.   credit cards are not considered money
D.   M1 only
Question #13
Congress passes the CARES act which gave each adult in the U.S. $1200 and provided other assistance to households and businesses. This is an example of
A.   contractionary monetary policy
B.   expansionary fiscal policy
C.   expansionary monetary policy
D.   contractionary fiscal policy
Question #14
The consumer price index may be inaccurate because it does not take into effect
A.   depreciation in the quality of a good
B.   government purchases
C.   improvements in the quality of a good
D.   imported goods
Question #15
Changes in all of the following choices will shift the aggregate supply curve except
A.   productivity
B.   natural resources
C.   net exports
D.   input prices
Question #16
The following is considered commodity money except
A.   gold
B.   paper notes declared legal tender
C.   copper coins
D.   shells
Question #17
In the AD-AS model, what is the effect of the aggregate supply curve increasing?
A.   price levels increase and real GDP increases
B.   price levels decrease and real GDP decreases
C.   price levels increase and real GDP decreases
D.   price levels decrease and real GDP increases
Question #18
A person deposits $7500 into a bank and the reserve requirement is 25%. How much money is created?
A.   $22,500
B.   $30,000
C.   $67,500
D.   $75,000
Question #19
A budget surplus occurs when
A.   tax revenue is more than government spending
B.   government spending is more than tax revenue
C.   tax revenue is equal to government spending
D.   tax revenue is less than government spending
Question #20
If the Federal Reserve sells government bonds, this will
A.   raise interest rates and increase aggregate demand
B.   raise interest rates and decrease aggregate demand
C.   lower interest rates and increase aggregate demand
D.   lower interest rates and decrease aggregate demand
Question #21
Which of the following is true about CPI?
A.   CPI includes imported goods
B.   CPI uses constant prices
C.   CPI includes government purchases
D.   CPI is measures inflation more accurately than GDP deflator

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