1. A law that would force the federal government to balance its budget every year would produce more volatile swings in the business cycle produce more tax revenues increase output and reduce employment in the long run cause the Federal Reserve to increase the monetary base 2. If the Federal Reserve pays commercial banks a higher interest rate on their reserves the monetary base will decrease the required reserve ratio will fall the money supply will decrease banks will increase borrowing from the Discount Window 3. An increase in government expenditures has a larger impact on GDP than a tax cut of the same amount. This occurs because the government makes better spending decisions than consumers consumers do not know how to spend their money consumers spend only part of the tax cut and save the rest government expenditures produces less waste

1. A law that would force the federal government to balance its budget every year would produce more volatile swings in the business cycle produce more tax revenues increase output and reduce employment in the long run cause the Federal Reserve to increase the monetary base 2. If the Federal Reserve pays commercial banks a higher interest rate on their reserves the monetary base will decrease the required reserve ratio will fall the money supply will decrease banks will increase borrowing from the Discount Window 3. An increase in government expenditures has a larger impact on GDP than a tax cut of the same amount. This occurs because the government makes better spending decisions than consumers consumers do not know how to spend their money consumers spend only part of the tax cut and save the rest government expenditures produces less waste

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter15: Monetary Theory And Policy

Section: Chapter Questions

Problem 2.5P

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I. Identification__________1. Shows combination of interest rates and the levels of output such that planned spending equals income.__________2. Monetary policy characterized by a decrease in money supply that results to a higher interest rate.__________3. Shows all combinations of interest rates and levels of income such that the demand for real balances is equal to the supply.__________4. It occurs when expansionary fiscal policy causes interest rates to rise, thereby reducing private spending, particularly investment.__________5. A policy on the regulation of the supply of money in the circulation.__________6. The policy of the government with regard to the level of government purchases, the level of transfers and the tax structures.II. Modified TRUE or FALSE: Write TRUE if the statement is correct and if the statement is false, choose the word or group of words that makes the statement false and write the correct word or group of words to make the statement correct.1. The lower the…
#32. When the Fed decreases the discount rate, banks will a borrow more from the Fed and lend less to the public. The money supply decreases. b borrow less from the Fed and lend less to the public. The money supply decreases. c borrow less from the Fed and lend more to the public. The money supply increases. d borrow more from the Fed and lend more to the public. The money supply increases.
The economy is at full employment, with fairly low levels of unemployment and inflation. What is likely to happen to GDP, unemployment, interest rates, and inflation if: d) the government increases its deficit at the same time that the Fed is reducing the money supply. e) the government increases its surplus at the same time that the Fed is increasing the money supply
ONLY answer! NO explanation! 1. The federal funds rate is:a) the rate at which the Fed lends money to commercial banksb) the rate at which consumers borrow money form commercial banksc) the rate at which one commercial bank borrows money from another commercial bankd) the rate at which investors borrow money from the Fed 2. Which of the following statement is true?a) Investment tax incentive increases investment, which increases productivity growth and living standards in the long run.b) Budget deficit reduces investment, which reduces productivity growth and living standards.c) Both investment tax incentive and budget deficit causes net exports to falld) all of the above 3. Which of the following caused a trade deficit in the USA during 1990s?a) Although national saving increased in the 1990s, investment increased even at a faster rate.b) Slowdown in national savings but a rapid increase in investment.c) Huge government deficit.d) An increase in government spending. 4. Let the govt.…
1- The Federal ________________________________________ (the Fed) is the primary force in determining our nation’s monetary supply. Its two goals are to help stimulate economic _________________________________________, and to keep inflation __________________________________. Often, it can’t do both at the same time. 1-Deficit reduction is not a ___________________________________ message; it just isn’t fun to talk about, so most politicians and the media don’t talk about it.
23. Which of the following is not a way that the United States government attempts to control the growth of the American economy and control for inflation? A. by changing reserve requirements B. by raising national debt C. by changing interest rates D. by changing money supply
1.How is GDP affected by the nominal and effective interest rate? 2.In Fiscal policy, how is GDP, spending and tax affected? 3.What is the relationship between inflation and interest rates in monetary policy?
4. What is the different between Monetary Policy and Fiscal Policy? Short answer
1. What were the factors that led to the adoption of modern monetary and fiscal policies? 2. Why was the US economy so disinflationary and deflationary in the 1800s? 3. What prompted the creation of the Federal Reserve System?
The table above shows Econland’s economy aggregate demand and aggregate supply schedules. Econland’s potential GDP is $400 billion. (4). Does Econland have an inflationary gap or a recessionary gap? (5). What is the size of the gap? (6). What specific fiscal policy would you prescribe to close the gap? (7). What specific monetary policy would you prescribe to close the gap?
1. Describe how the Federal Reserve can use its authority to attempt to stimulate the economy. 2. One of the major problems that led to the financial crisis was the ‘’ housing bubble.’’ What is meant by this term. 3. Name and explain two of the reasons the congressional committee identified for the recent financial crisis.
1. Describe the structure of the Federal Reserve System. Why was it designed this way? Should it be considered a more centralized or decentralized organization? 2. How does the FED rate along the scoring of the features you described? 3. What are two reasons that it took so long for the US government to adopt fiscal policy as a set of stabilization tools?

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	produce more volatile swings in the business cycle
	produce more tax revenues
	increase output and reduce employment in the long run
	cause the Federal Reserve to increase the monetary base

	the monetary base will decrease
	the required reserve ratio will fall
	the money supply will decrease
	banks will increase borrowing from the Discount Window

	the government makes better spending decisions than consumers
	consumers do not know how to spend their money
	consumers spend only part of the tax cut and save the rest
	government expenditures produces less waste