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BA 206 Final Exam Macroeconomics

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BA 206 Final Exam Macroeconomics

BA 206 Final Exam Macroeconomics

BA206

BA 206 Final Exam Macroeconomics

Question 1. Barter transactions involve the use of money.

Question 2. The use of money as a medium of exchange represents the most important service that money renders.

Question 3. Currency includes demand deposits.

Question 4. The money supply known as M1 includes all assets that are good stores of value.

Question 5. A primary tool of the Federal Reserve System is open market operations.

Question 6. Commercial banks and credit unions create money in concert with the Fed.

Question 7. Providing a secure place for savings is not a major function of financial institutions.

Question 8. The Fed’s reserve requirement ratio can reduce the monetary base.

Question 9. If bankers want to retain reserves of 25% against all deposits, if the Fed issues $100 billion in currency, and if private individuals keep all money in banks, then once the banks are fully loaned up, the money supply will consist of $400 billion in demand deposits.

Question 10. The Long-run Aggregate Supply Curve that is compatible with the classical macroeconomic model is a vertical line at full employment.

Question 11. When the federal government spends more than it collects, it must issue more debt or more monetary base.

Question 12. Keynesians tend to believe that massive tax cuts and new government spending are cures for recession.

Question 13. There are currently 13 Federal Reserve Districts.

Question 14. One of the 3 tools of the Federal Reserve is fiscal policy.

Question 15. Monetary policy of the Federal Reserve affects the monetary base to achieve its goals of rates of inflation and interest.

Question 16. The buying of securities in the open market by the Federal Reserve will augment the monetary base of the economy.

Question 17. The selling of securities in the open market by the Federal Reserve will actually decrease the monetary base by reducing the amount the banking system will ultimately be able to lend.

Question 18. The Federal Funds Market is actually monitored and manipulated by the Federal Reserve, but individuals can actually enter the market and borrow funds if desired.

Question 19. The short-run Phillips curve is a curve that shows the relationship between the inflation rate and the pure interest rate when the natural rate of unemployment rate and the expected inflation rate remain constant.

Question 20. When interest rates are rising, the tendency is for holders of M1 to get out of M1 and move into M2 and M3 due to the opportunity costs of holdingM1.

Question 21. The science of macroeconomics:

Question 22. The tax cuts passed by Congress in 2002 to help move the economy more rapidly toward potential GDP are an example of:

Question 23. In the post World War II period, considerable growth in total production took place in the U.S. But at the same time, businesses were dumping their waste into the Great Lakes with minimal cost to themselves, significantly polluting the bodies of water as a result. This occurrence is an example where:

Question 24. A Phillips curve measures the relationship between:

Question 25. In order for the United States to repay its international debt, the United States would need to:

Question 26. If the CPI was 122.3 at the end of 2007 and 124.5 at the end of 2008, the inflation rate over these two years was:

Question 27. A demand-pull inflation initially is characterized by:

Question 28. The labor force is the sum of the:

Question 29. In 2005, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In 2006, real GDP was $4.59 billion and population was 2.97 million. From 2005 to 2006, Armenia’s standard of living ________.

Question 30. According to real business cycle theory, a fall in the real interest rate ________ current labor supply and ________ current employment.