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.   Lending to nonbanks
B.   Increasing the discount rate
C.   Purchasing government securities
D.   Selling government securities
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 lower GDP
C.   Higher interest rates and higher GDP
D.   Lower interest rates and higher GDP
Question #3
What is the most effective monetary policy tool that the Federal Reserve uses?
A.   Discount rate
B.   Federal funds rate
C.   Reserve requirements
D.   Open market operations
Question #4
What is a likely direct result in bank behavior after the Fed lowers required reserve rate?
A.   Sell off government bonds
B.   Raise interest rates
C.   Issue more loans
Question #5
Who appoints the Governor of the Federal Reserve System?
A.   Board of Governors of the Fed
B.   Member banks
C.   U. S. Congress
D.   The president
Question #6
Which of the following is true about the Federal Reserve System?
A.   There are 12 regional Federal Reserve Banks
B.   The FOMC is smaller in size than the Federal Reserve Board
C.   There are 14 members of the Federal Reserve Board
D.   The head of the Treasury also chairs 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.   $400 million
B.   $400 billion
C.   $200 billion
D.   $200 million
Question #8
What happens to the money supply if the Fed decreases the reserve requirement?
A.   There is no change
B.   It increases
C.   It decreases
D.   It doubles
Question #9
What will be the effect of sales of government bonds?
A.   Decrease aggregate demand
B.   Increase aggregate demand
C.   Increase aggregate supply
D.   Decrease aggregate supply
Question #10
The main responsibility of a Central bank is:
A.   Both monetary and fiscal policy
B.   Monetary but not 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.   Stimulus Package
B.   Personal Income Tax
C.   Unemployment Insurance
D.   Food Stamps
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 this mandate cannot be added to the Constitution, and therefore, could not be enforced.
B.   One argument against a required balanced federal budget is that the government does not have macroeconomic responsibilities
C.   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.
D.   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.
Question #13
Social Security payments are a form of __ and available to __
A.   Progressive tax; to current retirees from funds from their past contributions
B.   Automatic stabilizers; current retirees using funds from current contributions
C.   Legislative lag; deducted from the higher-income groups to pay the lower income groups
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.   Increase taxes, decrease transfer payments, and/or decrease government spending.
B.   Decrease taxes, increase transfer payments, and/or decrease government spending
C.   Increase taxes, increase spending, and/or increase transfer payments
D.   Decrease taxes, decrease government spending, and/or decrease transfer payments
Question #15
Examine the following policies and determine which would decrease the level of aggregate demand.
A.   Decreasing in government spending and increasing in taxes
B.   Increasing investment and increasing government spending
C.   Increasing consumption and decreasing taxes
D.   Decreasing in government spending and decreasing taxes
Question #16
What causes the “crowding-out effect”?
A.   Foreign firms dominating the domestic economy
B.   Government borrowing and spending
C.   Excessive importation of goods and services
D.   Private consumption
Question #17
Who prepares and passes the federal budget?
A.   The President and Congress
B.   The President
C.   State Legislatures
D.   Congress
Question #18
What does a declining national debt indicate?
A.   The unemployment rate is declining.
B.   The rate of inflation is declining.
C.   The government is receiving more money in taxes than it spends in a year.
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.   Contractionary monetary policy
C.   Expansionary monetary policy
D.   Expansionary fiscal policy
Question #20
How can a budget deficit be reduced?
A.   By only increasing taxes
B.   Increasing government spending and/or decreasing taxes
C.   Lowering taxes and raising government spending
D.   Decreasing government spending and/or increasing taxes

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