16. If deficit spending does not contribute to public investment and crowds out
ID: 1177728 • Letter: 1
Question
16. If deficit spending does not contribute to public investment and crowds out private investment, then
A.
Future productive capacity will be enhanced.
B.
The rate of economic growth will decline, ceteris paribus.
C.
The opportunity cost of the debt will be minimized.
D.
The current generation will bear the total burden of the debt
17. Excess reserves are
A.
Total reserves less transactions account balances.
B.
Total reserves less required reserves.
C.
Required reserves less demand deposits.
D.
Bank reserves in excess of vault cash.
18. Which of the following reflects the concept of fractional reserves?
A.
Banks can lend only their required reserves.
B.
Excess reserves are equal to 0.
C.
The money multiplier is greater than 1.
D.
Required reserves are equal to total reserves
19. The Fed is most likely to pursue
A.
Numerous increases in the discount rate to tighten the money supply
quickly.
B.
Frequent changes in marginal tax rates.
C.
Frequent adjustment of the reserve requirement.
D.
Use of open market operations as the primary mechanism to change
reserves
20. Changing the reserve requirement is
A.
A tool that has little impact on the money supply.
B.
A powerful tool that can cause abrupt changes in the money supply.
C.
The most often-used tool on the part of the Fed.
D.
Effective in changing excess reserves but not the money supply.
21. Which of the following causes the opportunity cost of holding money in the form of cash to decrease?
A.
Higher short-term yields.
B.
Higher long-term yields.
C.
Higher reserve requirement.
D.
Lower interest rates.
22. Money held to buy bonds in the future represents the
A.
Interest earning demand for money.
B.
Speculative demand for money.
C.
Transactions demand for money.
D.
Bond broker demand for money.
23. Higher unemployment and higher inflation rates will most likely occur with
A.
A rightward shift of the aggregate supply curve.
B.
A rightward shift of the Phillips curve.
C.
A rightward shift of the aggregate demand curve.
D.
A leftward shift of the aggregate demand curve.
24. A one-time tax rebate
A.
Does not affect aggregate supply.
B.
Has the same impact as a decrease in marginal tax rates.
C.
Does not affect the Phillips curve.
D.
Increases the incentive to work and invest.
25. Growth in GDP per capita is attained when
A.
There is growth in population.
26. In order to increase productivity and economic growth, poor nations need
A.
Future productive capacity will be enhanced.
B.
The rate of economic growth will decline, ceteris paribus.
C.
The opportunity cost of the debt will be minimized.
D.
The current generation will bear the total burden of the debt
Explanation / Answer
The rate of economic growth will decline, ceteris paribus.
Total reserves less required reserves.
The money multiplier is greater than 1.
Use of open market operations as the primary mechanism to change reserves
Effective in changing excess reserves but not the money supply.
Lower interest rates.
Speculative demand for money.
A rightward shift of the Phillips curve
Increases the incentive to work and invest.
Increased capital investment
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