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Econ 202

exam 3

QuestionAnswer
________________ economists place an emphasis on __________ run economic performance. Neoclassical; long
The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its _____________ and its ____________________ potential GDP; natural rate of unemployment
Which of the following is a building block of neoclassical economics? wages and prices will adjust in a flexible manner
From a neoclassical viewpoint, government should focus less on: cyclical unemployment.
The Keynesian view of economics assumes that: wages are sticky.
In the neoclassic model, economic growth over time shifts potential GDP and the ______________ gradually to the right. vertical AS curve
Over the long run, a surge in aggregate demand from a neoclassical perspective will most likely result in: an increase in price level.
If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur? inflationary increase in price level
In the neoclassical view, changes in ____________________ can only have a short-run impact on output and on unemployment. aggregate demand
In the long-run neoclassical view, when wages and prices are flexible, ________________________ determine the size of real GDP. potential GDP and aggregate supply
Which of the following is omitted in a barter transaction? money
If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied. double coincidence of wants
In macroeconomics, a _______________ describes the common way in which market values are measured in an economy. unit of account
In modern economies, credit cards are a _________________ because of their wide acceptance as a method of payment for both goods and services. medium of exchange
Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it? store of value
In 2010, Tara used $50,000.00 from funds she had invested in certificates of deposit as a down payment to buy a house. What function did this portion of her investments serve when she made the down payment? medium of exchange.
If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system? medium of exchange
Which of the following is a valid criticism of the use of money as a store of value in modern economies? annual inflationary loss of buying power
___________ are funds that the bank keeps on hand that are not loaned out or invested in bonds. Reserves
If the central bank increases the amount of reserves banks are required to hold to 20%, then: both the money multiplier and supply of money in the economy will decrease.
Which of the following institutions determines the quantity of money in the economy as its most important task? Central Bank
Which of the following institutions oversees the safety and stability of the U.S. banking system? The Federal Reserve
Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? reserve requirements
What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks? discount rate
A central bank that wants to increase the quantity of money in the economy will: buy bonds in open market operations.
A central bank that desires to reduce the quantity of money in the economy can: raise the reserve requirement.
When the central bank lowers the reserve requirement on deposits: the money supply increases and interest rates decrease.
When the Federal Reserve announces that it is implementing a new interest rate policy, the ____________________ will be affected? federal funds rate
When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is: following an expansionary monetary policy.
____________________________ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect? Long and variable time lags
People or firms use one currency to purchase another currency at the _______________________ . foreign exchange market
What do the economies of Greece, Ireland and Germany all share? a common currency
If the Canadian dollar is strengthening, then: it has appreciated in terms of other currencies.
A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies. weakening; less
________________________ equalizes the prices of internationally traded goods across countries. Purchasing power parity
When a government uses a ______________ exchange rate policy, it usually allows the exchange rate to be set by the market. soft peg
In 2009, 1 U.S. dollar purchased 1400 Korean won and in 2013it purchased 900 Korean won. How much did 1000 Korean won cost in U.S. dollars in 2009 and 2013? 2009: .71 dollars, 2013: 1.11 dollars
Which of the following is an example of a pegged currency? Chinese yuan
Expansionary monetary policy lowers ______________ , and increases demand for investment and consumer borrowing, which shifts aggregate demand to the ________________ . interest rates; right
If a central bank focuses on preventing either high inflation or deep recession by using low and reasonably steady interest rate policy, then: exchange rates will have less reason to vary.
The neoclassical view holds that long-term expansion of potential GDP due to _______________________ will determine ____________________. economic growth; the size of the economy
In the neoclassical version of the AD/AS model, which of the following should you use to represent the AS curve? a vertical line drawn at the level of potential GDP
Which of the following is a distinguishing characteristic of the neoclassical view? flexibility of wages and prices over time
Why do neoclassical economists tend to put relatively more emphasis on long-term growth than on fighting recession? standard of living is ultimately determined by long-term growth
In order to shift the vertical supply curve to the left, which of the following would have to occur? breakdown of key market institutions
After reports of the subprime mortgage crisis began to appear in the media, which of the following most likely caused housing prices to fall? rational expectations
In the neoclassical view, changes in ____________________ can only have a short-run impact on output and on unemployment. aggregate demand
If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur? inflationary increase in price level
From a neoclassical view, which of the following is a true statement? The economy cannot sustain production above its potential GDP in the long run.
Which category of the money supply would you be contributing to if you invest in money market funds? M2
In modern economies, _____________________ receive money from savers and provide funds to borrowers. financial intermediaries
Banks can protect themselves against an unexpectedly high rate of loan defaults and against the risk of ____________________ by adopting a strategy that will ______________. an asset-liability time mismatch; diversify its loans
If Sarah uses her smart card to purchase movies over the internet, then the money to pay the retailer will come from: Sarah's M1 funds.
The market in which loans are bought and sold is called the: secondary loan market
. In an economy with _______________, money loses some buying power each year, but it remains money. inflation
_____________ are a form of financial instrument through which corporations and governments borrow money from financial investors and promise to repay with interest. Bonds
According to the basic quantity equation of money, if price and output fall while velocity increases, then: the quantity of money will fall.
Regardless of the outcome in the long run, ______________________ always has the effect of stimulating the economy in the short run. expansionary monetary policy
The ___________________ is the institution designed to control the quantity of money in the economy and also to oversee the: Central Bank; safety and stability of the banking system.
Which of the following is a traditional tool used by the Fed during recessions? open market operations
A central bank that wants to increase the quantity of money in the economy will: buy bonds in open market operations.
When the central bank lowers the reserve requirement on deposits: the money supply increases and interest rates decrease
How are the specific interest rates for the lending and borrowing markets determined? by the forces of supply and demand
When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is: following an expansionary monetary policy.
When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is: following a loose monetary policy.
What is the name given to the macroeconomic equation MV = PQ? basic quantity equation of money
Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________________. taking a management responsibility
If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to: a floating exchange rate.
For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits. swings in exchange rates
The _____________________________ is the largest market in the world economy. foreign exchange market
The most commonly traded currency in foreign exchange markets is the: U.S. dollar.
If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then: the dollar depreciated against the yen.
A soft peg exchange rate may create additional _______________ as exchange rate markets try to anticipate when and how the government will intervene. volatility
Created by: 1645761105535853