AP Macro Unit 4

Which of the following are true statements about the federal funds rate?

• I only

• II only

• III only

• I and II only

• II and III only

Suppose the Federal Reserve buys $400,000 worth of securities from the securities dealers on the open market. If the reserve requirement is 20% and the banks hold no excess reserves, what will happen to the total money supply?

• It will be unchanged.

• It will contract by $2,000,000.

• It will contract by $800,000.

• It will expand by $2,000,000.

• It will expand by $800,000.

Which of the following does the Federal Reserve use most often to combat a recession?

• Selling securities

• Buying securities

• Reducing the reserve requirement

• Increasing the discount rate

• Increasing the federal funds rate

To reduce inflation, the Federal Reserve could:

• expand the money supply in order to raise interest rates, which increases investment.

• expand the money supply in order to lower interest rates, which increases investment.

• contract the money supply in order to lower interest rates, which increases investment.

• contract the money supply in order to raise interest rates, which decreases investment.

• buy bonds and decrease the discount rate to encourage borrowing.

Check all that apply: Which THREE graphs show the Money Market?

• Graph B

• Graph A

• Graph C

• Graph D

• Graph AB

The expenditure by households on consumption goods and services.

• Business Cycle

• Exports of goods and services

• Consumption expenditure

• Government expenditure on goods and services

The belief the government must manage the economy by spending more money when in a recession and cutting spending when there is inflation.

• Keynesian Economics

• Supply-Side Economics

This country’s NRU is 6%. What is their targeted inflation rate?

• 5%

• 2%

• 3%

• 4%

It is the study of the nations economy as a whole.

• Microeconomics

• National economy

• National output

• Macroeconomics

The formula C+I+G+X represents ​ (a)   .

• Gross Domestic Product

• Nominal Imports

• Nominal Exports

• Gross International Product