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Homework answers / question archive / Kaplan University, Davenport - ECON 100 Sophia Marcoeconomics Milestone 3 1)Which of the following are NOT ways that budget deficits can have a negative effect on future economic growth? When the debt is held domestically
Kaplan University, Davenport - ECON 100
Sophia Marcoeconomics
Milestone 3
1)Which of the following are NOT ways that budget deficits can have a negative effect on future economic growth?
When the debt is held domestically.
When they are financed with foreign-held treasury debt.
When interest payments are made to foreigners.
When they are financed with an increase in taxes.
2
Using the expenditure approach and the information shown here, which of the following is the calculated GDP?
Individual Purchases: $32 billion
Government purchases: $200 billion
Business investments: $150 billion
Imports: $50 billion
Exports: $75 billion
$532 billion
$357 billion
$407 billion
$382 billion
3
Determine which scenario would NOT call for the Fed to intervene.
Prices are increasing rapidly; real value of the currency is falling.
Prices are decreasing quickly; real value of the currency is rising.
The economy is reaching hyperinflation.
Annual inflation is around 2%.
4
Which of the following is NOT a step in the process of lending federal funds?
At the end of the day, deposits and withdrawals influence the reserve level.
The FOMC sets a target for the federal funds rate.
The Fed gives short term loans to banks to help them meet reserve requirements.
Banks with excess reserves loan money for one night to banks who cannot meet the reserve.
5
Select the example below that is part of contractionary monetary policy.
Policies that reduce interest rates
Policies that can reduce excessive inflation
Open market purchases of treasury securities
Lowering the reserve requirement
6
Select the statement below that is FALSE about the Federal Reserve.
It helps banks clear checks from other banks.
It lets banks keep some of their reserves at regional branches.
It authorizes banks to print money.
There are 12 regional banks that are part of the Federal Reserve.
7
If the MPC is 0.75 and the government increases spending by $100 billion, the effect this change has on the economy will be which of the following?
There will be an increase of $75 billion in economic activity.
There will be an increase of $100 billion in economic activity.
There will be an increase of $400 billion in economic activity.
There will be an increase of $133.3 billion throughout the economy.
8
Which of the following is an example of the function of money as a unit of account?
As the use of gold evolved, people would list prices for products in gold.
Pieces of gold were easy to transport and trade for other items.
Gold became a popular form of money because it could be stored for long periods of time without tarnishing or rusting.
During the Great Depression, Americans hoarded gold.
9
What is the benefit of having a sole authority print currency?
The value of the currency becomes more certain.
It protects a country's economy because it creates a natural barrier to trade.
Bank runs are much less likely.
There could be multiple dollars in multiple checking accounts for every one dollar in reserve.
10
Which of the following is NOT a way that the Fed uses the open market to control the money supply?
The Fed gives bondholders cash in exchange for securities.
The Fed dictates the amount of money that banks must keep in their vaults.
The Fed buys U.S. Treasury securities.
To remove money from circulation, the Fed sells U.S. Treasury securities for cash.
11
If we look only at the domestic market, GDP is calculated using which equation below?
I = Y - C - G
Y = C + I + G (X - M)
S = (Y - (C + T) + (T - G))
Y = C + I + G
12
Which of the following was an advantage associated with the free banking system in place in the United States during the 19th century prior to the development of the Central Bank?
Individuals had difficulty judging the value of a note printed by an unknown bank.
The banking system created a very stable form of currency.
Currency traders could make a living trading currency between cities.
If a bank in one city went bankrupt, people in other cities would not hear about it for several weeks.
13
A(n) __________ is a system where banks in the United States eventually figured out that they could print more __________ than the gold that they had in their vaults.
fractional reserve; paper money
fractional reserve; fiduciary currency
open market operation; paper money
open market operation; fiduciary currency
14
The terms M0, M1, M2 classify money according to which of the following?
Reserve requirement
Unit of account
Adherence to the gold standard
Level of liquidity
15
The discount rate is charged to __________.
banks who borrow from other banks to meet liquidity needs
depositors who cannot meet their reserve requirement
member banks for short term loans from the Fed
bondholders who sell their bonds before they mature
16
Which of the following could be the long run effect of budget deficits?
Stronger domestic currency
Slower economic growth
Increased investment
Lower interest rates
17
Which of the choices below is NOT true about expansionary fiscal policy?
It is financed by selling treasury securities.
It will result in an increase in the unemployment rate.
It often results in government expenditures exceeding tax revenues.
It can trigger the multiplier effect.
18
If the reserve requirement for a bank is 25%, $15 in M0 will lead to which of the following amounts of money of M1?
$15
$4
$45
$60
19
Select the statement below that is FALSE regarding the history of the development of central banks.
Banks record entries in people's deposit accounts, allowing them to write checks based on money in reserves.
Banks have developed ways to prevent future panics and runs from happening.
Today, banks prefer people to deposit gold instead of paper currency.
Banks store paper money, known as reserves, in the vault.
20
Which of the following is the Federal Reserve Committee responsible for making key decisions about interest rates and the money supply?
FOMC
The House of Representatives
Federal Reserve Districts
The Executive Branch
21
When Treasury bills are auctioned off, if buyers are willing to pay $900 for a $1,000 treasury bill, the government is being asked to pay what percent in interest, if the bills mature after a period of one year?
5%
9%
1%
10%
22
Which statement below regarding the use of a gold standard is FALSE?
Paper money is more liquid than gold.
Banks developed as a way to store gold safely.
The United States currently uses the gold standard to value its currency.
Gold had much more practical value than as jewelry in regards to the gold standard.
23
Which of the following is not a goal of monetary policy?
Prevent deflation of the currency
Promote the increase of printed paper currency
Promote maximum stable employment
Prevent destruction of the currency's value
