ECO 105 Test 5
Economics 105 with Ostrosky at Illinois State University
About this deck
By: Julie Olcikas
Textbook:
Principles of Economics
Created: 2011-04-25
Size: 42 flashcards
Views: 241
Textbook:
Principles of EconomicsCreated: 2011-04-25
Size: 42 flashcards
Views: 241
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An open market purchase is where the fed...
purchases government bonds from the public, thereby increasing the money supply. ↑
The ultimate cause of inflation is...
too much money being created
Credit cards are....
a method of deferring payment.
To increase the money supply ↑, the fed would...
decrease the discount rate ↓
To decrease the money supply, the fed would...
sell government bonds to the public
If reserve requirements are decreased, the reserve ratio will ________, the money multiplier will ______, and the money supply will ________
Reserve ratio will decrease ↓
Money multiplier will increase ↑
Money supply will increase ↑
Money multiplier will increase ↑
Money supply will increase ↑
The discount rate is....
the interest rate on loans the Fed makes to banks
The rate of inflation measures....
the increase in the overall level of prices ↑
The quantity theory of money....
implies that prices will fall if the money supply falls ↓↓
If P is the price level, then....
1/P is the value of money measure in terms of goods and services
The value of money is....
determined by the supply and demand of money
The most important variable affecting the demand for money in the long run is...
the price level
As the price level increases....↑
the demand for money increases ↑, and the value of money decreases ↓.
The amount of money people choose to hold in the long run depends primarily on...
the general price level
Economic variables that are measured in monetary units are referred to as...
nominal variables
The notion that money supply changes will not affect real variables is called...
monetary neutrality
During a recession the economy experiences...
falling incomes ↓ and rising unemployment ↑
In a recession, real GDP falls ↓ and...
investment spending falls ↓
The aggregate demand curve shows...
An inverse (↑↓) relationship between the expenditure of households, businesses, government and the foreign sector and the overall price level.
The wealth effect implies that...
When the price level decreases (↓) consumer purchasing power goes up (↑) and therefore consumers spend more.
The exchange rate effect implies that when the price level increases ↑
Net exports (NX) decreases ↓
Which of the following does not shift the aggregate demand curve?
- Monetary policy
- fiscal policy
- price level
- changes in consumption (C) and investment (I)
If consumers or business change their spending plans, there will be...
a shift of the aggregate demand curve
What causes the aggregate supply curve to shift?
Non-price variables
What causes movement along the aggregate supply curve?
Price variables
Which of the following factors shifts the long run aggregate supply curve?
- monetary policy
- fiscal policy
- price level
- technology
When production costs rise ↑, in the short run what happens to output and price?
Output falls ↓ and price rises ↑
The economy experiences stagflation when....
Decreases in output ↓ are accompanied by higher prices ↑
The Theory of Liquidity Preference assumes that the nominal supply of money is determined by....
the FED.
Which of the following is the most liquid asset?
- funds in a savings account
- funds in a checking account
- a credit card
- a share of Microsoft stock
The Theory of Liquidity Preference emphasizes which of the following as a key determinant of the quantity of money demanded?
- the price level
- the level of GDP
- the interest rate
- the exchange rate
The money demand curve is downward sloping because...
people will want to hold more money as the cost of doing so falls
The Theory of Liquidity Preference illustrates the principle that...
monetary policy can be described either in terms of the money supply OR in terms of the interest rate.
A change in monetary policy that aims to expand aggregate demand can be described as _____ the money supply or as ______ the interest rate
Increasing the money supply ↑
Lowering the interest rate ↓
Lowering the interest rate ↓
The multiplier effect is...
the multiplied impact on aggregate demand of a given increase in government purchases
An increase in government purchases is likely to...
crowd out investment spending by businesses
If Congress cuts spending to balance the federal government budget, the Fed can act to prevent unemployment/recession by using...
expansionary monetary policy
What would economists argue is correct when the economy is experiencing unemployment?
decrease taxes
How do you figure out the min. reserve requirement with the assets/liabilities chart?
Take Required Reserves (RR) and put it over Deposits to get the percentage. EX: 250/1000 = .25. OR 1000(.25) = 250 (This is when the chart only gives you deposits & you need to figure out RR)
If the Reserve Ratio is 25%, an additional $5,000 of reserves will increase the money supply by:
(1/RR) 5,000(1/.25) = $20,000
What are the 3 key facts about the business cycle?
- Economic fluctuations are irregular and unpredictable
- Most macroeconomic quantities fluctuate together
- As output falls ↓, unemployment rises ↑.
What does a long run aggregate supply curve imply?
Overall output stays the same when price increases
About this deck
By: Julie Olcikas
Textbook: Principles of Economics
Created: 2011-04-25
Size: 42 flashcards
Views: 241
Textbook:
Principles of EconomicsCreated: 2011-04-25
Size: 42 flashcards
Views: 241
About StudyBlue
STUDYBLUE makes things that make you better at school.
Things like online flashcards with photos and audio.
Things like personalized quizzes and friendly reminders about when (and what) to study next.
Think of it as a digital backpack™: access to all of your study materials online and on your phone.
STUDYBLUE exists to make studying efficient and effective for every student, for free. Join us.
“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis
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