Econ 102 - Principles of Macroeconomics » Winter 2023 » Week 5 Reading Quiz Chs. 15 and 17

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Question #1
The Fed can put more reserves into the banking system by:
A.   Selling government securities
B.   Increasing the discount rate
C.   Purchasing government securities
D.   Lending to nonbanks
Question #2
What would be the impact of a decrease in money supply?
A.   Lower interest rates and lower GDP.
B.   Higher interest rates and higher GDP
C.   Higher interest rates and lower GDP
D.   Lower interest rates and higher GDP
Question #3
What is the most effective monetary policy tool that the Federal Reserve uses?
A.   Open market operations
B.   Federal funds rate
C.   Discount rate
D.   Reserve requirements
Question #4
What is a likely direct result in bank behavior after the Fed lowers required reserve rate?
A.   Issue more loans
B.   Raise interest rates
C.   Sell off government bonds
Question #5
Who appoints the Governor of the Federal Reserve System?
A.   Board of Governors of the Fed
B.   The president
C.   Member banks
D.   U. S. Congress
Question #6
Which of the following is true about the Federal Reserve System?
A.   The FOMC is smaller in size than the Federal Reserve Board
B.   The head of the Treasury also chairs the Federal Reserve Board
C.   There are 12 regional Federal Reserve Banks
D.   There are 14 members of the Federal Reserve Board
Question #7
Consider a situation where the central bank increases the money supply. All other things being equal, if nominal GDP increased by $800 billion during a time when velocity was 4, by how much did the central bank increase the money supply?
A.   $200 billion
B.   $200 million
C.   $400 million
D.   $400 billion
Question #8
What happens to the money supply if the Fed decreases the reserve requirement?
A.   It decreases
B.   There is no change
C.   It increases
D.   It doubles
Question #9
What will be the effect of sales of government bonds?
A.   Increase aggregate demand
B.   Decrease aggregate supply
C.   Increase aggregate supply
D.   Decrease aggregate demand
Question #10
The main responsibility of a Central bank is:
A.   Monetary but not fiscal policy
B.   Both monetary and fiscal policy
C.   Fiscal but not monetary policy
D.   Neither monetary or fiscal policy
Question #11
Which of the following is NOT an example of an automatic stabilizer?
A.   Unemployment Insurance
B.   Personal Income Tax
C.   Food Stamps
D.   Stimulus Package
Question #12
Which of the following is a TRUE statement about arguments for and against requiring a balanced federal budget in the U.S.?
A.   One argument against a required balanced federal budget is that the government does not have macroeconomic responsibilities
B.   One argument in support of a required balanced federal budget maintains that having a balanced budget each year would make the impacts of economic recessions less severe.
C.   One argument against a required balanced federal budget is that this mandate cannot be added to the Constitution, and therefore, could not be enforced.
D.   One argument against a required balanced federal budget is that sometimes it is necessary or beneficial to run large budget deficits in the short-run.
Question #13
Social Security payments are a form of __ and available to __
A.   Legislative lag; deducted from the higher-income groups to pay the lower income groups
B.   Automatic stabilizers; current retirees using funds from current contributions
C.   Progressive tax; to current retirees from funds from their past contributions
D.   Contractionary fiscal policy; current older workers from funds deducted from younger workers
Question #14
To maintain a balanced budget during a recession, what should the government do?
A.   Decrease taxes, decrease government spending, and/or decrease transfer payments
B.   Increase taxes, decrease transfer payments, and/or decrease government spending.
C.   Decrease taxes, increase transfer payments, and/or decrease government spending
D.   Increase taxes, increase spending, and/or increase transfer payments
Question #15
Examine the following policies and determine which would decrease the level of aggregate demand.
A.   Increasing consumption and decreasing taxes
B.   Decreasing in government spending and increasing in taxes
C.   Decreasing in government spending and decreasing taxes
D.   Increasing investment and increasing government spending
Question #16
What causes the “crowding-out effect”?
A.   Excessive importation of goods and services
B.   Private consumption
C.   Foreign firms dominating the domestic economy
D.   Government borrowing and spending
Question #17
Who prepares and passes the federal budget?
A.   Congress
B.   The President and Congress
C.   The President
D.   State Legislatures
Question #18
What does a declining national debt indicate?
A.   The unemployment rate is declining.
B.   The government is receiving more money in taxes than it spends in a year.
C.   The rate of inflation is declining.
D.   The government is spending more money than it receives in taxes for a given year.
Question #19
If the U.S. Congress passes legislation to raise taxes to control inflation, what kind of policy is this?
A.   Contractionary fiscal policy
B.   Expansionary fiscal policy
C.   Contractionary monetary policy
D.   Expansionary monetary policy
Question #20
How can a budget deficit be reduced?
A.   Increasing government spending and/or decreasing taxes
B.   By only increasing taxes
C.   Decreasing government spending and/or increasing taxes
D.   Lowering taxes and raising government spending

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