AGEC 217 Exam 3 || A+ Guaranteed.
Among the functions of money are... correct answers to act as a medium of exchange, a unit of
account, and a store of value
The establishment of deposit insurance in 1934 increased the money supply because correct
answers it eliminated the reason for bank runs, which allowed banks to keep lower reserves
Unemployment insurance is an automatic fiscal stabilizer because correct answers when
recessions occur, spending increases and taxes decline without the need for new legislation
Which of the following is countercyclical fiscal policy? correct answers The Federal government
decreases taxes during a recession
The Federal Reserve's policy mistakes during the 1929-1933 period made the Great Depression
worse. Among these mistakes were correct answers allowing the money supply to decrease
substantially, and failing to act as a lender of last resort to stop bank runs
Using fiscal policy to offset recessions presents a number of problems to policymakers, including
correct answers the fact that households may save their tax cuts rather than spend them, and
added spending on infrastructure sometimes takes years to plan
During and after World War Iim the U.S treasury required the Federal Reserve to fix interest
rates at a low level, in order to reduce the costs of borrowing for war spending. Output far
exceeded potential during the war, and after the war inflation increased to double digits, The
Treasury's interest rate policy was... correct answers pro-cyclical, because rising incomes and
inflation caused money demand to rise, and to hold interest rates low the Fed had to increase the
money supply. Increasing the money supply during expansion and inflation is pro-cyclical policy
The baby boom is likely to create financial problems for the Social Security program because
correct answers benefits are financed primarily by current taxes, and there will be fewer working
people to support each retiree once the boomers retire
The correlation between the real federal funds interest rate of the money supply was -0.75 for the
years 1987-2016, which was period correct answers Increase in money supply cause decreases in
the real interest rate, which is what the money market predicts
Expectations of economic growth can cause stock market values to increase because correct
answers growth leads to higher business profits, and owners of stock receive a share of those
profits.
Suppose people become pessimistic about the economy. They begin to save more to build funds
in case they lose their jobs. The consumption function, C = A + b (Y - T + R), shows that correct
answers consumption spending will decrease, reducing aggregate demand and causing output to
decrease.
, Suppose the inflation rate was 1.1% and the real GDP growth rate was -0.7%. Which of the
following would be a counter-cyclical monetary policy in this economy? correct answers
Reducing the discount rate to increase bank borrowing from the Federal Reserve.
Which of the following is a counter-cyclical monetary policy? correct answers An increase in
spending on the armed forces.
Using fiscal policy to offset recessions presents a number of problems to policymakers,
including correct answers the fact that households may save their tax cuts rather than spend
them, and added spending on infrastructure sometimes takes years to plan.
Suppose we measure the budget balance as a percentage of GDP, by subtracting Federal
government spending from Federal government revenues, and dividing the result by GDP. Then
we calculate a correlation between this budget balance percentage and the unemployment rate,
and find a correlation of -0.59 for a period of years. This means that correct answers The Federal
budget was counter-cyclical during these years
Suppose our model produces a hypothesis, that increases in the money supply cause decreases in
the real federal funds interest rate. We calculate a correlation between this money supply growth
and the real federal funds rate for a period of years, and find a correlation of -0.59. This is
evidence that correct answers supports the hypothesis that increases in the money supply reduce
the real federal funds rate
Budget Director Lewis Douglas feared that Federal budget deficits would cause inflation. He
reasoned that correct answers big, continuing deficits would require selling Treasury bonds to the
Federal Reserve, which would print money to buy them. The added money would lead to
inflation
Deposit insurance increased the money supply because correct answers it eliminated the reason
for bank runs, which allowed banks to keep lower reserves.
Why didn't the Korean War cause inflation in the U.S.? correct answers Taxes were increased
enough to pay for war expenditures. There was no pressure on the Fed to increase the money
supply to hold interest rates low.
Among the reasons that policymakers in the 1930's decided not to build a Social Security trust
fund were correct answers tax hikes without benefit payments would cause recession, and
currently retired people demanded benefits.
Consider the following paragraph from a Federal Reserve policy statement:
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and
price stability. The Committee expects that, with appropriate policy accommodation, economic
growth will pick up from its recent pace and the unemployment rate will gradually decline
toward levels the Committee judges consistent with its dual mandate. The Committee sees the
downside risks to the outlook for the economy and the labor market as having diminished, on
Among the functions of money are... correct answers to act as a medium of exchange, a unit of
account, and a store of value
The establishment of deposit insurance in 1934 increased the money supply because correct
answers it eliminated the reason for bank runs, which allowed banks to keep lower reserves
Unemployment insurance is an automatic fiscal stabilizer because correct answers when
recessions occur, spending increases and taxes decline without the need for new legislation
Which of the following is countercyclical fiscal policy? correct answers The Federal government
decreases taxes during a recession
The Federal Reserve's policy mistakes during the 1929-1933 period made the Great Depression
worse. Among these mistakes were correct answers allowing the money supply to decrease
substantially, and failing to act as a lender of last resort to stop bank runs
Using fiscal policy to offset recessions presents a number of problems to policymakers, including
correct answers the fact that households may save their tax cuts rather than spend them, and
added spending on infrastructure sometimes takes years to plan
During and after World War Iim the U.S treasury required the Federal Reserve to fix interest
rates at a low level, in order to reduce the costs of borrowing for war spending. Output far
exceeded potential during the war, and after the war inflation increased to double digits, The
Treasury's interest rate policy was... correct answers pro-cyclical, because rising incomes and
inflation caused money demand to rise, and to hold interest rates low the Fed had to increase the
money supply. Increasing the money supply during expansion and inflation is pro-cyclical policy
The baby boom is likely to create financial problems for the Social Security program because
correct answers benefits are financed primarily by current taxes, and there will be fewer working
people to support each retiree once the boomers retire
The correlation between the real federal funds interest rate of the money supply was -0.75 for the
years 1987-2016, which was period correct answers Increase in money supply cause decreases in
the real interest rate, which is what the money market predicts
Expectations of economic growth can cause stock market values to increase because correct
answers growth leads to higher business profits, and owners of stock receive a share of those
profits.
Suppose people become pessimistic about the economy. They begin to save more to build funds
in case they lose their jobs. The consumption function, C = A + b (Y - T + R), shows that correct
answers consumption spending will decrease, reducing aggregate demand and causing output to
decrease.
, Suppose the inflation rate was 1.1% and the real GDP growth rate was -0.7%. Which of the
following would be a counter-cyclical monetary policy in this economy? correct answers
Reducing the discount rate to increase bank borrowing from the Federal Reserve.
Which of the following is a counter-cyclical monetary policy? correct answers An increase in
spending on the armed forces.
Using fiscal policy to offset recessions presents a number of problems to policymakers,
including correct answers the fact that households may save their tax cuts rather than spend
them, and added spending on infrastructure sometimes takes years to plan.
Suppose we measure the budget balance as a percentage of GDP, by subtracting Federal
government spending from Federal government revenues, and dividing the result by GDP. Then
we calculate a correlation between this budget balance percentage and the unemployment rate,
and find a correlation of -0.59 for a period of years. This means that correct answers The Federal
budget was counter-cyclical during these years
Suppose our model produces a hypothesis, that increases in the money supply cause decreases in
the real federal funds interest rate. We calculate a correlation between this money supply growth
and the real federal funds rate for a period of years, and find a correlation of -0.59. This is
evidence that correct answers supports the hypothesis that increases in the money supply reduce
the real federal funds rate
Budget Director Lewis Douglas feared that Federal budget deficits would cause inflation. He
reasoned that correct answers big, continuing deficits would require selling Treasury bonds to the
Federal Reserve, which would print money to buy them. The added money would lead to
inflation
Deposit insurance increased the money supply because correct answers it eliminated the reason
for bank runs, which allowed banks to keep lower reserves.
Why didn't the Korean War cause inflation in the U.S.? correct answers Taxes were increased
enough to pay for war expenditures. There was no pressure on the Fed to increase the money
supply to hold interest rates low.
Among the reasons that policymakers in the 1930's decided not to build a Social Security trust
fund were correct answers tax hikes without benefit payments would cause recession, and
currently retired people demanded benefits.
Consider the following paragraph from a Federal Reserve policy statement:
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and
price stability. The Committee expects that, with appropriate policy accommodation, economic
growth will pick up from its recent pace and the unemployment rate will gradually decline
toward levels the Committee judges consistent with its dual mandate. The Committee sees the
downside risks to the outlook for the economy and the labor market as having diminished, on
