Eco 216 Spring 2022 Test Review

Among the functions of money is acting as a medium of exchange.

true

Among the characteristics of money is being legal tender.

false

If there are 20 goods and no unit of account there will be 190 prices.

true

To raise money to spend the government must either tax people, borrow it or print it.

true

Included in the M1 definition of money are small time deposits.

false

Gresham's law says people will hold good money and spend bad money.

true

The AS curve can be positively sloped in the long run.

false

In the money stock equation B is the monetary base, is controlled by the FED and is positively related to the money supply.

true

The members of the Board of Governors of the FED have a 14 year term and are limited to one term.

true

If there is a pandemic, then AS increases.

false

The FED controls the economy.

false

The discount rate is set by the Board of Governors of the FED.

true

The lags of monetary policy are shorter than the lags of fiscal policy making monetary policy less effective.

false

If the inflation rate rises, then the unemployment rate falls.

false

Increase in uncertainty that slow irreversible investments makes recessions worse.

true

In Figure 1, the bank in figure 1 can make an additional loan of at most: a. $20,000

b. $80,000

c. $100,000

d.$400,000

e. none of the above

$80,000

If people hold no cash, banks hold no excess reserves and the bank in figure 1 is the only bank, it will expand deposits to: a.$100,000 b. $400,000. c.$500,000 d.$1,000,000 e.none of the above

$500,000

If people hold no cash, banks hold no excess reserves and the bank in figure 1 is the only bank, it will eventually hold required reserves of: a.$100,000 b. $400,000. c.$500,000 d. $1,000,000 e.none of the above

$100,000

Among the functions of a central bank are: controlling the economy.

a. Controlling the economy

b. paying for government spending

c. acting as a lender of last resort during bank panic

d. all of the above

e. none of the above

acting as a lender of last resort during a bank panic

Among the functions of a central bank are: controlling the economy, paying for government spending, acting as a lender of last resort during a bank panic.

a. Are the members of the board of governors

b. is the Comptroller of the Currency

c. is the Secretary of the Treasury

d. all of the above

e. none of the above

Are the members of the board of governors

In Figure 2, if the FED increases the growth rate of money, AD increases.

a. AS increases

b. AD increases

c. AS decreases

d. AD decreases

e. none of the above

AD increases

In figure 2 if aggregate demand is decreased, then the inflation rate falls.

a. the inflation rate rises

b. the inflation rate falls

c. AS rises

d. AS falls

e. none of the above

the inflation rate falls

In figure 2, if AS increases, then the inflation rate falls and the real GDP growth rate rises.

a. and real GDP growth rise

b. rises and the real GDP growth rate falls

c. falls and the real GDP growth rate rises

d. and real GDP growth fall

e. none of the above

falls and the real GDP growth rate rises

In figure 2 to increase aggregate supply the government could:

a. increase patent length

b. decrease R&D subsidies

c. increase government spending.

d. all the above

e. none of the above

increase patent length

In figure 2 to increase aggregate demand, the government could:

a. increase the growth of taxes

b. Decrease government spending growth

c. increase the money supply growth rate.

d. all the above

e. none of the above

increase the money supply growth rate

In figure 3, to increase AS, the government could:

a. slow regulation growth

b. increase the money supply

c. increase government spending.

Slow regulation growth

In figure 3, AS may be positively sloped due to:

a. GDP growth

b. sticky prices

c. growing inflation.

sticky prices

In figure 3, to increase AD, the central bank could:

a. lower the discount rate

b. lower the required reserve ratios

c. buy bonds on the open market.

d. all of the above

e. none of the above

all the above

In figure 3, if the government decreases tax rates then:

a. AD increases.

b. AD decreases

c. AS increasing

d. AS decreases

e. none of the above

AS increases

In figure 3, if AS decreases, then the inflation rate:

a. and real GDP growth rises

b. rises and real GDP growth falls

c. falls and real GDP rises

d. and real GDP growth falls

e. none of the above

rises and real GDP growth falls