AP Macro: U5 review

When the government spends more money than they take in each year is called a _________?

• Debt
• Deficit
• Surplus
• Expansionary

If the Federal Reserve wanted to stimulate the economy (make it grow), they might

• Sell Treasury bonds
• Buy Treasury bonds
• Spend more money
• Spend less money

Which of the following scenarios would cause the nation’s money supply to increase?

• Decreasing government spending
• Lowering interest rates
• Raising interest rates
• Selling bonds to investors

This shift could occur with

• an increase in bank lending.

• the purchase of securities in the open market by the Fed.

• a decrease in the discount rate.

• an increase in the Federal Funds rate.

• a decrease in the reserve ratio.

A shift from MD1 to MD2 could be caused by

• customers wishing to hold more cash and use credit cards less.

• a decrease in the discount rate.

• an open market operation sale of bonds to the Fed.

• the GDP falling.

• an open market operation purchase of bonds by the Fed.

The shift in the graph could be caused by

• a recession.

• government deficit spending.

• an increase in savings.

• positive feelings about the future of the economy.

• the Fed selling securities in an open market operation.

An increase in government spending only leads to an increase in the Demand for Loanable Funds when

• the spending is on infrastructure.
• the spending is on education.
• the spending is deficit spending.
• the spending leads to a surplus.

The crowding out effect can only occur if the

• government deficit spends.
• government runs a surplus.
• personal savings rate increases.
• economy begins to boom.

The crowding out effect manifests itself in the GDP formula by causing

• an increase in G and a decrease in X_n.
• a decrease in G and an increase in C.
• an increase in I and a decrease in G.
• an increase in G but a decrease in I.

If the federal government has a budget deficit and enacts expansionary fiscal policy, then

• the demand for loans shifts to the left.

• the demand for loans shifts to the right.

• the supply of loanable funds shifts to the right.

• the supply of loanable funds shifts to the left.