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Study Resources (Accounting)

11.1   The Goals and Tools of Fiscal Policy 1) Fiscal policy refers to changes in A) the money supply and interest rates that are intended to achieve macroeconomic policy objectives. B) federal taxes, purchases, and transfer payments that are intended to achieve macroeconomic policy objectives. C) federal taxes, purchases, and transfer payments that are.
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15) Refer to Figure 12.4. Suppose the economy is initially at long-run equilibrium and the economy experiences a demand shock such as a stock market crash. The economy then reaches a new, short-run equilibrium point. Assuming expectations are adaptive, this will allow the central bank to decrease the real interest.
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9.3   Equilibrium in the IS-MP Model 1) Assume the economy is initially in equilibrium where potential GDP equals real GDP. If the expected inflation rate, the term structure effect, and the default-risk premium are constant, a decrease in the Fed's target short-term nominal interest rate will ________ the MP curve and.
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13.1   Debt and Deficits in Historical Perspective 1) The government's budget constraint is best represented by which of the following equations? A) Government purchases of goods and services + Transfer payments + Interest payments on existing debt = Tax revenue + Newly issued government bonds + Seigniorage B) Government purchases of goods and.
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21) Since 1962, which of the following federal expenditures, measured as a percentage of GDP, has decreased? A) Social Security B) Medicare and Medicaid C) net interest D) defense 22) Since 1962, which of the following federal expenditures, measured as a percentage of GDP, has increased the most? A) Social Security B) Medicare and Medicaid C) net interest D).
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9.4   The IS-MP Model and the Phillips Curve 1) A Phillips curve shows the short-run relationship between A) potential GDP and real GDP. B) the nominal interest rate and the real interest rate. C) tax rates and tax revenues. D) the unemployment rate and the inflation rate. 2) An increase in the unemployment rate which is.
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13.4   The Fiscal Challenges Facing the United States 1) The main fiscal policy challenge for the future in the United States is rising expenditures on A) transfer programs. B) education. C) national defense. D) the net interest on the federal debt. 2) From 2010 until 2084, the CBO projects that, as a percentage of GDP, government.
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11) Assume the economy is initially in equilibrium with real GDP equal to potential GDP. Other things equal, if the economy enters a recession and there are automatic stabilizers, the initial decrease in investment expenditure resulting from the recession is ________ what the decrease would be without automatic stabilizers, and.
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5) Historically, the largest U.S. federal budget deficits as a percentage of GDP since the beginning of the 20th century occurred during A) the Great Depression. B) World War I and World War II. C) 1970-1997. D) 2007-2009. 6) An economic expansion tends to cause the federal budget deficit to ________ because tax revenues ________.
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10.1   The Federal Reserve System 1) The Federal Reserve System (The Fed) is the ________ incarnation of a central bank in the United States. A) first B) second C) third D) fourth 2) The Federal Reserve was established in 1913 to A) prevent bad loans by requiring banks to hold reserves. B) stop bank panics by acting as.
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10.3   Monetary Policy Tools 1) Of the three traditional monetary policy tools the Fed can use to achieve its monetary policy goals, the most important is A) making discount loans. B) paying interest on bank reserves. C) conducting open market operations. D) setting reserve requirements. 2) The Fed conducts open market operations with the primary goal.
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15) The federal government debt as a percentage of GDP fell during A) 2002-2007. B) 1980-1992. C) 1997-2001. D) World War II. 16) In the United States, interest payments on the federal debt are currently about ________ of total federal expenditures, and therefore large tax increases or significant cutbacks in other types of federal spending.
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14) Maryanne expects to work for another 30 years and expects to live another 10 years after she retires. If Maryanne completely smooths consumption over her lifetime, her marginal propensity to consume out of wealth is A) 0.025. B) 0.033. C) 0.075. D) 0.10. 15) Households in the United States more completely smooth out expenditures.
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21) For each of the following scenarios, state the short-run effect on the AD curve. a. The price level decreases. b. The target inflation rate increases. c. The U.S. dollar falls in value relative to other currencies. d. Government spending increases. e. The Fed becomes more tolerant of deviations from the target inflation rate. 22) Explain.
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8) Explain the difference between the Fed following discretionary policy and the Fed following a rules strategy. 9) What are the primary arguments in favor of a rules approach, and what are the primary arguments in favor of a discretion approach? 10) Explain how discretionary monetary policy may have brought about the.
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14.1   The Macroeconomic Implications of Microeconomic Decision Making: Intertemporal Choice 1) If a borrower does not have the resources to make a down payment or the ability to post collateral, and is therefore unable to obtain a loan even when he is willing to pay the current interest rate, the borrower.
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13.3   Effects of Budget Deficits on Investment 1) The government's budget deficit is financed by some combination of all of the following except A) increased private saving. B) increased transfer payments. C) net exports. D) reduced private investment expenditure. 2) If the government decreased income taxes by $500 billion and does not pursue a policy change,.
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5) If the central bank is facing the zero bound constraint and announces a higher inflation target, A) the real interest rate will increase, which will decrease aggregate expenditure. B) the real interest rate will decrease, which will increase aggregate expenditure. C) the nominal interest rate will increase, which will decrease aggregate expenditure. D).
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11) Refer to Table 13.2. For Garbanzo, the total federal debt owned by federal government agencies in 2011 is A) $1,225 billion. B) $1,325 billion. C) $1,610 billion. D) $1,875 billion. 12) Refer to Table 13.2. For Garbanzo, the total federal debt owned by private investors in 2011 is A) $265 billion. B) $550 billion. C) $650 billion. D).
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12.4   Rational Expectations and Policy Ineffectiveness 1) Suppose the Fed has a target inflation rate of 3%, the Fed always hits its target, and the inflation rate has been 3% for several  years. Furthermore, assume Amazon sets the price of its Kindle at $140 in 2011 and wants to keep the.
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4) According to the permanent-income hypothesis, A) the present value of lifetime consumption equals the present value of lifetime income. B) the income earned in a lifetime will be evenly divided between consumption and saving. C) household consumption depends on income that households expect to receive each year, and financial markets are.
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12.1   Monetary Policy Rules and Aggregate Demand 1) In general, a formula that a central bank uses to set interest rates in response to changing economic conditions is called a A) rate-of-return equation. B) Taylor rule. C) monetary policy rule. D) market adaptation identity. 2) The steeper the monetary policy rule, the ________ the central bank.
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11) By rescuing large, troubled institutions, as happened during the 2007-2009 financial crisis and recession with institutions like AIG and General Motors, policymakers attempted to achieve financial and economic stability in the short run, but their actions may encourage even riskier behavior on the part of these large institutions in.
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9.5   The Performance of the U.S. Economy During 2007-2009 1) The financial market shock which occurred during the recession of 2007-2009 increased the default-risk premium, causing the A) IS curve to shift to the right. B) IS curve to shift to the left. C) MP curve to shift up. D) MP curve to shift down. 2).
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11.4   The Limitations of Fiscal Policy 1) Three policy lags limit the effectiveness of monetary policy: recognition lags, implementation lags, and impact lags. Of these three policy lags, fiscal policy is impacted by A) only implementation and impact lags. B) only recognition and implementation lags. C) only recognition and impact lags. D) all three policy.
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4) When the nominal interest rate is constant, ________ in the growth rate of the money supply ________ the inflation rate, and ________ the debt-to-GDP ratio. A) an increase; increases; increases B) an increase; decreases; increases C) a decrease; decreases; decreases D) a decrease; decreases; increases 5) A decrease in the inflation rate will lead.
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11) The White House's deficit commission has proposed several ways for the government to reduce the federal budget deficit, including raising the retirement age for Social Security. Other things equal, raising the retirement age for Social Security would tend to ________ the supply of labor and ________ the equilibrium wage.
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9.2   The Monetary Policy Curve: The Relationship Between the Central Bank's Target Interest Rate and Output 1) Which of the following equations best represents the long-term real interest rate? The long-term real interest rate = A) the short-term real interest rate + the term structure effect + the default-risk premium + the.
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17) The U.S. National Commission on Fiscal Policy and Reform has recommended changes to government expenditures and taxes which they claim would reduce the increase in the national debt between 2012 and 2020 to $4 trillion rather than $8 trillion. What are the commission's 5 recommendations? 18) For each of the.
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21) By engaging in quantitative easing, the Fed is attempting to reduce the ________, causing the MP curve to ________. A) term premium and the real interest rate; shift down B) unemployment rate and the inflation rate; shift down C) short-term nominal and real interest rates; shift up. D) federal funds rate; shift up 22).
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11) Suppose the economy is in equilibrium with an output gap equal to zero and the actual inflation rate equals the expected inflation rate. If the economy experiences a negative demand shock, the output gap will ________ and the inflation rate will ________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease;.
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10.2   The Goals of Monetary Policy 1) Included among the Fed's primary goals to promote a well-functioning economy are A) high employment, low inflation, and a high foreign-exchange value of the dollar. B) price stability, economic growth, and a high reserve ratio. C) low government budget deficits, interest rate stability, and no inflation. D) a.
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