ECON 2305/ECON2305 - EXAM 5 ALL ANSERS 100% CORRECT FALL-2021/2022 SOLUTION GUARANTEED GRADE A+

1. If the government were to double taxes on people who earn more than $1 million per year, the deficit would disappear. a. True b. False 2. Refer to this graph. Which one of the following shocks could have caused this to happen? a. an increase in marginal tax rates b. an increase in the foreign exchange value of the dollar c. an increase in government spending d. an increase in wage rates or other resource costs 3. Money creates wealth. a. True b. False //See the video "How the Economy Really Works." GrowEconomy, Dec 5, 2011. 4. If people are generally willing to accept dollar bills in exchange for goods and services, dollar bills are being used as a a. store of value b. unit of accounting c. standard of deferred value d. medium of exchange //Watch this video: Clifford, Jacob. "Macro 4.2 - Functions of Money." ACDCLeadership, Dec 30, 2013. 5. If the economy develops an inflationary gap, an appropriate action would be for the Federal Reserve to a. sell government securities (or other assets) b. buy government securities (or other assets) 6. When the federal debt (also called the public debt) increases, which of the following will happen, ceteris paribus? a. interest rates won't change b. interest rates will fall c. interest rates will rise 7. If Jessie deposits her savings in a commercial bank, rather than using those funds to buy shares of stock or bonds issued by business firms, then she is engaging in a. direct finance b. indirect finance 8. How much will the money supply potentially change by if the reserve ratio = 0.1 and the Federal Reserve buys assets such as government securities worth $3,045? a. 30,450 margin of error +/- 1 9. Refer to this graph. Which one of the following shocks could have caused this to happen? a. an increase in real interest rates b. discoveries of raw materials c. a decrease in government spending d. decreased competition 10. The Bureau of Engraving and Printing controls the size of our money supply a. True b. False