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.   Purchasing government securities
C.   Lending to nonbanks
D.   Increasing the discount rate
Question #2
What would be the impact of a decrease in money supply?
A.   Higher interest rates and higher GDP
B.   Lower interest rates and lower GDP.
C.   Lower interest rates and higher GDP
D.   Higher interest rates and lower GDP
Question #3
What is the most effective monetary policy tool that the Federal Reserve uses?
A.   Reserve requirements
B.   Discount rate
C.   Federal funds rate
D.   Open market operations
Question #4
What is a likely direct result in bank behavior after the Fed lowers required reserve rate?
A.   Issue more loans
B.   Sell off government bonds
C.   Raise interest rates
Question #5
Who appoints the Governor of the Federal Reserve System?
A.   Member banks
B.   U. S. Congress
C.   Board of Governors of the Fed
D.   The president
Question #6
Which of the following is true about the Federal Reserve System?
A.   There are 14 members of 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.   The FOMC is smaller in size than 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 billion
B.   $200 million
C.   $400 million
D.   $200 billion
Question #8
What happens to the money supply if the Fed decreases the reserve requirement?
A.   It decreases
B.   It increases
C.   There is no change
D.   It doubles
Question #9
What will be the effect of sales of government bonds?
A.   Increase aggregate demand
B.   Decrease aggregate demand
C.   Decrease aggregate supply
D.   Increase aggregate supply
Question #10
The main responsibility of a Central bank is:
A.   Monetary but not fiscal policy
B.   Both monetary and fiscal policy
C.   Neither monetary or fiscal policy
D.   Fiscal but not monetary 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 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 sometimes it is necessary or beneficial to run large budget deficits in the short-run.
D.   One argument against a required balanced federal budget is that this mandate cannot be added to the Constitution, and therefore, could not be enforced.
Question #13
Social Security payments are a form of __ and available to __
A.   Contractionary fiscal policy; current older workers from funds deducted from younger workers
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.   Progressive tax; to current retirees from funds from their past contributions
Question #14
To maintain a balanced budget during a recession, what should the government do?
A.   Increase taxes, increase spending, and/or increase transfer payments
B.   Decrease taxes, increase transfer payments, and/or decrease government spending
C.   Decrease taxes, decrease government spending, and/or decrease transfer payments
D.   Increase taxes, decrease transfer payments, and/or decrease government spending.
Question #15
Examine the following policies and determine which would decrease the level of aggregate demand.
A.   Increasing investment and increasing government spending
B.   Decreasing in government spending and decreasing taxes
C.   Decreasing in government spending and increasing in taxes
D.   Increasing consumption and decreasing taxes
Question #16
What causes the “crowding-out effect”?
A.   Government borrowing and spending
B.   Excessive importation of goods and services
C.   Foreign firms dominating the domestic economy
D.   Private consumption
Question #17
Who prepares and passes the federal budget?
A.   The President and Congress
B.   Congress
C.   The President
D.   State Legislatures
Question #18
What does a declining national debt indicate?
A.   The rate of inflation is declining.
B.   The government is receiving more money in taxes than it spends in a year.
C.   The unemployment rate 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.   Expansionary monetary policy
B.   Expansionary fiscal policy
C.   Contractionary monetary policy
D.   Contractionary fiscal policy
Question #20
How can a budget deficit be reduced?
A.   Decreasing government spending and/or increasing taxes
B.   By only increasing taxes
C.   Lowering taxes and raising government spending
D.   Increasing government spending and/or decreasing taxes

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