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Econ Test 4 UPDATED Actual Exam Questions and CORRECT Answers
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Econ Test 4 UPDATED Actual Exam Questions and CORRECT Answers Discretionary fiscal policy refers to - CORRECT ANSWER- intentional changes in taxes and government expenditures made by Congress to stabilize the economy Countercyclical discretionary fiscal policy calls for - CORRECT ANSWER- defi...

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  • September 20, 2024
  • 8
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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Econ Test 4 UPDATED Actual Exam
Questions and CORRECT Answers
Discretionary fiscal policy refers to - CORRECT ANSWER- ✔✔intentional changes in taxes
and government expenditures made by Congress to stabilize the economy


Countercyclical discretionary fiscal policy calls for - CORRECT ANSWER- ✔✔deficits
during recessions and surpluses during periods of demand-pull inflation


Expansionary fiscal policy is so named because it - CORRECT ANSWER- ✔✔is designed to
expand real GDP


Contractionary fiscal policy is so named because it - CORRECT ANSWER- ✔✔is aimed at
reducing aggregate demand and thus achieving price stability


If the MPS in an economy is 0.1 government could shift the aggregate demand curve
righward by 40 billion by - CORRECT ANSWER- ✔✔increasing government spending by 4
billion: Multiplier = 1/1-MPC or 1/MPS = 1/0.1 = 10 > 40bil/10 = 4 billion


Money functions as - CORRECT ANSWER- ✔✔a store value, a unit of account, and a
medium of exchange


If you are estimating your total expenses for school next semester, you are using money
primarily as - CORRECT ANSWER- ✔✔a unit of value


purchasing groceries using a debit card best exemplifies money serving as a - CORRECT
ANSWER- ✔✔medium of exchange


In defining money as M1, economists exclude time deposits because - CORRECT
ANSWER- ✔✔they are not directly or immediately a medium of exchange



Which is not a part of the M2 money supply? - CORRECT ANSWER- ✔✔Large
denominated time deposits

, What corrects for a recession? - CORRECT ANSWER- ✔✔Expansionary fiscal policy



What corrects inflation? - CORRECT ANSWER- ✔✔Contractionary fiscal policy



M1 - CORRECT ANSWER- ✔✔Currency + Checkable deposits



M2 - CORRECT ANSWER- ✔✔M1 + small time deposits


The goldsmith's ability to create money was based on the fact that - CORRECT ANSWER-
✔✔paper money in the form of gold receipts was rarely redeemed for gold



Most modern bank systems are based on - CORRECT ANSWER- ✔✔Fractional reserves



What are fractional reserves - CORRECT ANSWER- ✔✔The bank will have to pay only a
fraction back to the Fed


Which of the following statements is correct?
• The actual reserves of a commercial bank equal its excess reserves minus its required
reserves
• a bank's liabilities plus its net worth equal its assets
• When borrowers repay bank loans, the supply of money increases
• A single commercial bank can safely lend a multiple amount of its excess reserves -
CORRECT ANSWER- ✔✔A bank's liabilities plus it's net worth equal its assets


A bank that has assets of $85 billion and a net worth of $10 billion must have - CORRECT
ANSWER- ✔✔Liabilities of $75 billion



Assets = - CORRECT ANSWER- ✔✔liabilities + net worth

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