Macro Exam 2

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  1. Which of the following best describes personal disposable income?
    After-tax personal income
  2. The marginal propensity to save (MPS)...
    is the percent of a change in income directed toward saving
  3. Among the main form of leakages from the income-consumption flow are:
  4. Fiscal policy involves:
    changing government spending or taxes to alter economic activity
  5. If injections into the income-consumption flow are less than leakages, we would expect (according to Keynesian economists)
    a decreasing level of GDP over time
  6. When rising consumption causes an induced change in investment expenditures, and the percent increase in investment exceeds that of consumption, we are examining the:
    accelerator effect
  7. Which of the following would be an example of a transfer payment?
    Social Security payments to retirees
  8. The larger the marginal propensity to consume:
    the larger the government expenditure multiplier
  9. If the government decides to increase taxes by $50 billion and the marginal propensity to consume is .90 (90%), then GDP will:
    fall by $450 billion
  10. With a marginal propensity to consume of 80%(.8), the tax multiplier equals

    • Mg=1/1-MPC
    • Mt= Mg-1
  11. Which of the following if it occurred, would directly cause the actual level of GDP to rise (according to a Keynesian)?
    an increase in government expenditures
  12. According to Keynesian economists, it is possible at some times that as we, as a nation, attempt to save more we actually save less. This concept is called:
    the Paradox of Thrift
  13. To close an inflationary gap, a Keynesian would say the government can:
    decrease government spending, which will decrease aggregate demand
  14. In the federal funds market:
    banks make short-term loans to other banks
  15. If the reserve requirement were 25%, then the potential money multiplier would be equal to:
  16. When the Federal Reserve buys back treasury securities on secondary markets, the...
    excess reserves in the banking system are increased
  17. The Federal Reserve can attempt to increase the money supply by
    lowering the reserve requirement
  18. The amount of funds that an individual commercial bank can safely lend out (in a multiple banking system) is equal to:
    excess reserves
  19. Which of the following is the most powerful (and least used) monetary policy tool available to the Federal Reserve?
    changes in the reserve requirement
  20. If a commercial bank currently holds demand deposits of $500 million, a total reserve account of $150 million, and it (like all other banks) must meet a reserve requirement of 20%, what can this individual bank create (lend out) in the form of demand deposits?
    $50 million
  21. If a commercial bank currently holds demand deposits of $500 million, a total reserve account of $150 million, and it (like all other banks) must meet a reserve requirement of 20%, what can the banking system as a whole create over time?
    $250 million
  22. Which of the following is not a part of the money supply M1?
    Money Market Deposit Accounts
  23. The number of times a dollar's worth of money is used for spending purposes within the course of a year's time is known as:
    the velocity of money
  24. The primary liabilities of a commercial bank include:
    customer deposits at the bank
  25. Financial instruments that have an original maturity of one year or less are called:
    Money market instruments
  26. Which of the following is the relationship among total, required, and excess reserves?
    total reserves= excess reserves+ required reserves
  27. When the Federal Reserve decreases the money supply, what should happen to interest rates (according to Keynesian economists)?
    they will rise
  28. How many Federal Reserve District Banks are there in the United States?
  29. The change in consumption resulting from a change in income is known as the:
    marginal propensity to consume
  30. Secondary financial markets
    Markets that have been resold such as a stock that is constantly resold
  31. Gre

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Macro Exam 2
2015-12-12 20:49:15
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