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ECN EXAM 3 QUESTIONS WITH LATEST ANSWERS GRADED A+
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ECN EXAM 3 QUESTIONS WITHLATEST ANSWERS GRADED A+
1 of
47
Ter
m
Which kind of monetary policy would you expect in
response to
high inflation: expansionary or contractionary?Why?
Give this one a try
later!
An expansionary monetary policy, also called a loose monetary policy, seeks to boost
aggregate demand. An contractionary monetary policy, also called a tight
monetary policy, seeks to reduce aggregate demand.
, A central bank conducts monetary policy, which involves controlling the quantity
of money in the economy.
I would expect expansionary monetary policy in response to a recession
because it boosts aggregate demand in order to counter a recession.
I would expect expansionary monetary policy in response to high inflation,
because contractionary monetary policy seeks to hold down inflation.
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2 of 47
Term
What are the three functions served by money?
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1) national
defense A banks liabilities can be
2)social security withdrawn in the short term while its
3) health care assets are repaid in the long
4) interest payments term.
1) money serves as a
The assets of a bank include its
medium of exchange 2)
loans, its ownership of bonds, and
money serves as a unit of
its reserves. The liabilities of a
account
bank are its deposits.
3) money serves as a store
of value
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,3 of 47
Term
What is the lender of last resort?
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1) Individual income
taxes
Velocity is a term that
2) Payroll taxes
economists use to describe how
3) Corporate income tax
quickly money circulates through
4) Excise tax
the economy.
5) Estate and gift tax
If a bank does not diversify its loans
then they can experience an An institution that provides
unexpectedly high rate of loan
short-term emergency loans
defaults and an asset-liability time
in conditions of financial crisis.
mismatch.
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4 of 47
Term
What are the main categories of U.S. federal government taxes?
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MV = PQ, where M is the money 1) national defense
supply, V is the velocity of money, P 2)social security
, is the price level, and Q is the 3) health care
real output of the economy. 4) interest payments
1) Individual income taxes
An institution that provides short-
2) Payroll taxes
term emergency loans in conditions
3) Corporate income tax
of financial crisis.
4) Excise tax
5) Estate and gift tax
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5 of 47
Term
Whats the difference between discretionary fiscal policy
and automatic stabilizers?
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1) expansionary fiscal policy can raise interest rates, which tends to
reduce the expansionary impact of the policy
2)there are long and variable time lags in enacting fiscal policy and waiting for
it to have an effect
3) the impact of temporary fiscal policy is smaller than the impact of
permanent fiscal policy
4) fiscal policy cannot push economic output above the potential GDP level of
output
5) it may be hard to persuade politicians of the merits of countercyclical
fiscal policy
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