If the Federal Reserve wishes to use monetary policy to reinforce Congress' fiscal policy changes, it should

decrease its administered interest rates when government spending is increased

decrease its administered interest rates when government spending is decreased

increase its administered interest rates when government spending is increased

increase its administered interest rates when income taxes are decreased

decrease its administered interest rates when income taxes are increased

Suppose that the Federal Reserve is committed to keeping the nominal interest rate fixed. To maintain the interest rate target in the face of an expansionary fiscal policy, the Federal Reserve can do which of the following?

Decrease its administered interest rates

Increase the federal funds rate

Which of the following policy combinations is most likely to cure a severe recession?

Monetary Policy Action - Decrease interest on reserves, Taxes - Decrease, Government Spending - Increase

Monetary Policy Action - Decrease interest on reserves, Taxes - Increase, Government Spending - Decrease

Monetary Policy Action - Decrease interest on reserves, Taxes - Decrease, Government Spending - Decrease

Monetary Policy Action - Increase interest on reserves, Taxes - Decrease, Government Spending - Decrease

Monetary Policy Action - Increase interest on reserves, Taxes - Increase, Government Spending - Increase

To stimulate investment in new plant and equipment without increasing the level of real output, the best policy mix is to

decrease administered interest rates and decrease government spending

increase administered interest rates and increase government spending

increase administered interest rates and increase income taxes

decrease administered interest rates and decrease income taxes

decrease income taxes and increase government spending

Which of the following monetary and fiscal policy combinations would most likely result in a decrease in aggregate demand?

Central Bank's Administered Interest Rates - Raise, Income Tax Rates - Raise, Government Spending - Decrease

Central Bank's Administered Interest Rates - Lower, Income Tax Rates - Lower, Government Spending - Increase

Central Bank's Administered Interest Rates - Lower, Income Tax Rates - Lower, Government Spending - Decrease

Central Bank's Administered Interest Rates - Raise, Income Tax Rates - Raise, Government Spending - Increase

Central Bank's Administered Interest Rates - Raise, Income Tax Rates - Lower, Government Spending - Increase

According to the long-run Phillips curve, which of the following is true?

The natural rate of unemployment is independent of monetary and fiscal policy changes that affect aggregate demand.

Unemployment increases with an increase in inflation.

Unemployment decreases with an increase in inflation.

Increased automation will lead to lower levels of structural unemployment in the long run.

Changes in the composition of the overall demand for labor tend to be deflationary in the long run.

According to the short-run Phillips curve, a decrease in unemployment is expected to be accompanied by

higher labor-force participation

an increase in the productivity of capital

an increase in the government deficit

a decrease in real gross domestic product

According to the short-run Phillips Curve, there is a trade-off between

the growth of the money supply and interest rates

unemployment and economic growth

economic growth and interest rates

An increase in which of the following will lead to lower inflation and lower unemployment?

The international value of domestic currency

Which of the following could cause simultaneous increases in inflation and unemployment?

An increase in inflationary expectations

A decrease in government spending

A decrease in the velocity of money

An increase in the overall level of productivity

Which of the following relationships is illustrated by a short-run Phillips curve?

A decrease in the rate of inflation is accompanied by an increase in the rate of unemployment.

A decrease in the rate of inflation is accompanied by an increase in the rate of economic growth.

An increase in the rate of inflation is accompanied by a decrease in the rate of economic growth.

An increase in the rate of inflation is accompanied by an increase in the rate of unemployment.

A decrease in the rate of economic growth is accompanied by a decrease in the rate of unemployment.

Which of the following is true of the long-run Phillips curve?

It is vertical at the natural rate of unemployment.

It shows there is a trade-off between unemployment and inflation.

It is positively sloped when the inflation rate exceeds the unemployment rate.

It shifts to the right if aggregate demand increases.

It is created by an adverse supply shock.

Suppose that, from 1985 to 1986, unemployment fell from 7.2 to 7.0 percent and inflation fell from 3.8 to 1.1 percent. An explanation of these changes might be that the

aggregate supply curve shifted to the right

aggregate demand curve shifted to the left

aggregate demand curve shifted to the right

aggregate supply curve shifted to the left

short-run Phillips curve shifted to the right

The diagram above shows the short-run Phillips curve (SRPC) and the long-run Phillips curve (LRPC) for an economy. If the inflation rate is currently 6 percent, which of the following is true about the current unemployment rate?

The current unemployment rate is 2%.

The current unemployment rate is 1%.

The current unemployment rate is 3%.

The current unemployment rate is 4%.

The current unemployment rate is 5%.

Which of the following will most likely occur if a government adopts an annually balanced budget rule that requires the government to eliminate any deficits or surpluses?

The automatic stabilizing effect of fiscal policy will be eliminated.

Unemployment will be eliminated and prices will be stable.

The national debt will increase.

Business cycles will become more stable.

The government will be forced to spend less when there are surpluses.

Which of the following is true about the national debt of the United States?

It is the accumulation of past and current budget deficits and surpluses.

It is the debt owed to foreign investors.

It increases when gross domestic product increases.

It increases when exports decrease, and decreases when exports increase.

Which of the following will occur if the federal government runs a budget deficit?

The size of the national debt will increase.

The expenditure multiplier will increase.

The economy's output will decrease.

State governments will run a budget surplus to offset the federal deficit.

Interest rates will tend to decline.

Federal budget deficits occur when

the federal government spends more than it collects in taxes in a given year

more money is being spent on entitlement programs than has been allocated

the Internal Revenue Service spends more than it collects in taxes in a given year

high levels of unemployment use up tax collections

interest payments on the national debt increase from one year to the next

When the United States government engages in deficit spending, that spending is primarily financed by

increasing the required reserve ratio

appreciating the value of the dollar

depreciating the value of the dollar

An increase in Japan's demand for United States goods would cause the value of the dollar to

appreciate because Japan would be buying more United Stated dollars

depreciate because of inflation

depreciate because the United States would be selling more dollars to Japan

depreciate because the United States money supply would increase as exports rise

appreciate because Japan would be selling more United States dollars

An increase in which of the following would reduce the United States balance-of-trade deficit?

The value of foreign currency relative to the United States dollar

United States demand for foreign goods

United States rate of inflation compared to other countries

United States interest rates compared to other countries

Assume that the inflation rate in Country X is very high relative to the inflation rates in all of its trading partners. Which of the following is likely to happen to Country X's currency on the foreign exchange market?

The demand curve for the currency will shift to the left, and the currency will depreciate.

The demand curve for the currency will shift to the right, and the currency will appreciate.

The supply curve for the currency will shift to the left, and the currency will appreciate.

The supply curve for the currency will shift to the left, and the currency will depreciate.

There will be no shift in the demand curve for the currency, but the currency will depreciate.

In a country that has a flexible exchange rate and a banking system with limited reserves, an open market sale of bonds by the central bank will most likely change the money supply, the interest rate, and the value of the country's currency in which of the following ways?

Money Supply: Decrease, Interest Rate: Increase, Value of the Currency: Increase

Money Supply: Increase, Interest Rate: Decrease, Value of the Currency: Decrease

Money Supply: Increase, Interest Rate: Decrease, Value of the Currency: Increase

Money Supply: Decrease, Interest Rate: Decrease, Value of the Currency: Decrease

Money Supply: Decrease, Interest Rate: Increase, Value of the Currency: Decrease

The United States government is running a budget deficit. What will most likely happen to the United States dollar in the foreign exchange market?

Appreciate because interest rates will increase.

Depreciate because interest rates will decrease.

Appreciate because interest rates will decrease.

Depreciate because interest rates will increase.

Not change because the budget deficit has no effect on the exchange rate.

Which of the following would be a current account transaction?

A United States firm sells $500 million of its products to a Chinese company.

India buys $10 billion of new United States Treasury bonds.

A United States firm buys 5 percent of the stock of another United States firm.

A United States firm builds a new factory in Kenya.

The United States buys $8 billion worth of euros.

Which of the following would cause the United States dollar to increase in value compared to the Japanese yen?

An increase in interest rates in the United States

An increase in the money supply in the United States

An increase in the United States trade deficit with Japan

The United States purchase of gold on the open market

The sale of $2 billion dollars worth of Japanese television sets to the United States

If a country has a current account deficit, which of the following must be true?

It must show a surplus in its capital account.

It must also show a deficit in its capital account.

It must increase the purchases of foreign goods and services.

It must increase the domestic interest rates on its bonds.

It must limit the flow of foreign capital investment.

Which of the following is an example of foreign direct investment?

A United States automobile manufacturer building a steel plant in Russia

A United States citizen purchasing corporate bonds issued by a French manufacturing firm

A Mexican citizen purchasing United States Treasury bills

The Federal Reserve purchasing Japanese yen

Immigrant workers in the United States sending money to their native country

Which of the following changes will occur to the demand for United States dollars and the international value of the dollar in the short run if investors in the United States and abroad increase their purchases of United States government bonds?

Demand for Dollars - Increase, International Value of the Dollar - Increase

Demand for Dollars - Decrease, International Value of the Dollar - Decrease

Demand for Dollars - Decrease, International Value of the Dollar - Increase

Demand for Dollars - Decrease, International Value of the Dollar - No change

Demand for Dollars - Increase, International Value of the Dollar - Decrease

If a French firm buys computers from the United States, there would be an increase in which of the following in the foreign exchange market?

Demand for United States dollars and supply of euros

Demand for both United States dollars and euros

Supply of United States dollars and demand for euros

Supply of both United States dollars and euros

International value of the euro relative to the United States dollar

If Mexicans increase their investment in the United States, the supply of Mexican pesos to the foreign exchange market and the dollar price of the peso will most likely change in which of the following ways?

Supply of Pesos - Increase, Dollar Price of Peso - Decrease

Supply of Pesos - Increase, Dollar Price of Peso - Increase

Supply of Pesos - Decrease, Dollar Price of Peso - Increase

Supply of Pesos - Decrease, Dollar Price of Peso - Decrease

Supply of Pesos - Decrease, Dollar Price of Peso - No Change

If other things are held constant, an increase in United States imports will

tend to cause the dollar to depreciate because the world supply of dollars will rise

tend to cause the dollar to appreciate because the world supply of dollars will rise

tend to cause the dollar to appreciate because the world demand for dollars will rise

have no effect on the exchange rate for the dollar because exports will also increase

tend to cause the dollar to depreciate because the world demand for dollars will rise

With an increase in investment demand in the United States, the real interest rate rises. In this situation, the most likely change in the capital stock in the United States and in the international value of the dollar would be which of the following?

Capital Stock in United States - Increase, International Value of the Dollar - Increase

Capital Stock in United States - Increase, International Value of the Dollar - Decrease

Capital Stock in United States - Increase, International Value of the Dollar - No change

Capital Stock in United States - Decrease, International Value of the Dollar - Increase

Capital Stock in United States - No change, International Value of the Dollar - Decrease

AP Macro Unit 5/6 AP Classroom

Authored by gitgud sux

Business

12th Grade

Used 4+ times

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42 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

An increase in government spending with no change in taxes leads to a

lower income level

lower price level

smaller money supply

higher interest rate

higher bond price

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Assume that the government implements a deficit-reduction policy that results in changes in aggregate income and output. Then the Federal Reserve engages in monetary policy actions that reverse the changes in income and output caused by fiscal policy action. Which of the following sets of changes in taxes, government spending, and administered interest rates is most consistent with these policies?

Taxes Increase, Government Spending Increase, Administered Interest Rates Decrease

Taxes Increase, Government Spending Decrease, Administered Rates Decrease

Taxes Increase, Government Spending Decrease, Administered Interest Rates Increase

Taxes Decrease, Government Spending Increase, Administered Interest Rates No change

Taxes Decrease, Government Spending Decrease, Administered Interest Rates Decrease

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A stimulative fiscal policy combined with a restrictive monetary policy will necessarily cause

gross domestic product to increase

gross domestic product to decrease

interest rates to fall

interest rates to rise

the federal budget deficit to decrease

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If investors feel that business conditions will deteriorate in the future, the demand for loans and real interest rate in the loanable funds market will change in which of the following ways in the short run?

Demand for Loans Increase, Real Interest Rate Increase

Demand for Loans Increase, Real Interest Rate Decrease

Demand for Loans Decrease, Real Interest Rate Increase

Demand for Loans Decrease, Real Interest Rate Decrease

Demand for Loans Decrease, Real Interest Rate Not change

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

An increase in the demand for loanable funds could be best explained by which of the following?

There is a decrease in investment spending.

here is an increase in the government's budget surplus.

Firms are optimistic about the future performance of the country's economy.

Domestic investors seek higher returns by investing in foreign financial assets.

The economy is facing political instability.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If both contractionary monetary policy and contractionary fiscal policy are carried out, what will most likely happen to interest rates and real gross domestic product (GDP) in the short run?

Both interest rates and real GDP will increase.

Both interest rates and real GDP will decrease.

Interest rates will decrease, and real GDP will stay the same.

Interest rates will increase, and real GDP will decrease.

Real GDP will decrease, and the change in interest rates will be indeterminate.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If the government simultaneously engages in expansionary monetary and fiscal policies, which of the following is the effect on interest rates and unemployment?

Interest Rates Increase, Unemployment Indeterminate

Interest Rates Increase, Unemployment Decrease

Interest Rates Decrease, Unemployment Decrease

Interest Rates Indeterminate, Unemployment Decrease

Interest Rates Indeterminate, Unemployment Increase

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