Question # 1

A sale of bonds by the central bank should cause.

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A fall in the interest rate

An increase in the money supply

A decrease in the reserves of the commercial banks

An increase in the commercial banks loans to the public

Suppose you are a monetarist and believe in the the monetarist rule which the monetary authorities appear to be following if the economy beings to experience a slight increase in the inflation rte you would recommend that the monetary autorities.

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Increase the money growth rate slightly

Decrease the money growth rate slightly

Leave the money supply growth unchanged

Enact a one time slight decrease in the money supply

The largest source of tax revenue for the federal government is.

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The personal income tax

The social security tax

The property tax

The sales tax

The government performs its redistribution function mainly through.

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Trade practice legislation against anticipative behavior

The provision of public goods

Taxes and transfer payments

Tariffs on imports

As a result of the increase in government expenditures disposable income increases by.

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Rs.10 billion

Rs.9 billion

Rs.20 billion

Rs.5 billion

The parable of Riding a Switchback suggests that stabilizing policy.

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Is not sufficiently stimulating or contra citing the economy at any time

Is desirable

Is effective

Is stimulating or contracting the economy at the wrong times.

What major advantage of monetary policy over fiscal policy does this clipping underline.

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Monetary policy is more effective

Monetary policy is lss discriminatory

Monetary policy can influence interest rates

Monetary policy can be undertaken more quickly

If Federal reserve conducts open market sales, the money supply ___ shifting the LM curve to the_____

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decreases ; right

decreases ; left

Increases ; right

Increase ; left

The money multiplier is 4, and the money creating potential of the banking system is Rs. 40,000,000. The legal reserve ratio and the excess reserves are.

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40 percent and Rs. 4,000,000

40 percent and Rs. 10,000,000

25 percent and Rs. 2.500,000

25 percent and Rs.10,000,000

An example of nondiscretionary fiscal policy would be.

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The operation of the welfare state

A Federal jobs program adopted to stimulate consumption

A tax cut adopted to stimulate consumption

An interest rate cut implemented to stimulate consumption

The ____ lag for fiscal policy is generally _____ than it is for monetary policy.

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Recognition ; shorter

Recognition ; longer

Implementation ; shorter

Implementation ; longer

Increasing the government budget deficit.

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Increases output in the long run

Decreases output in the short run

Decreases output in the long run.

Decreases the interest rate in the medium run.

What happens to the money supply if the deficit is financed by selling bonds to the general public.

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The money supply increaes

The money supply decreases

The money supply is unaffected

We cannot tell what will happen to the money supply

An increase in oil prices, such as the oil shocks in the 70 s, lead to _______ there by causing _____

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A movement along the AS curve cost push inflation

A leftward shift int he AS curve demand pull inflation.

A right ward shift in the AS Curve cost push inflation

a left ward shift in the AS curve cost push inflation

You move some of your savings account balance into your checking account.

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M2 falls and M1 rises

M1 falls and M2 rises

M1 and M2 are unchanged

M1 rises and M2 remains unchanged

A good that is used as a medium of exchange as well as being a consumption good is called.

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A barter money

A commodity money

A legal tender

A debased money

What technical terminology do economists use to refer to how much the money will multiply as this process unfolds.

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The multiplier

The money multiplier

Required reserve ratio

Open market operations

A decrease in fully autonomous investment other things equal shifts the ______ curve to the

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IS ; right

IS ; Left

LM ; Left

LM ; right

The relation between M2 and inflation is tighter than the relation between M1 and inflation because.

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M1 is larger than M2

The demand for M2 is more stable

M1 includes more liquid assets the M2

None of the above answers is correct.

If the Federal reserve conducts open market __ the money supply __ shifting LM curve to the left.

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Purchases ; decreases

sales ; decreases

purchases ; increases

sales ; increases

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