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James borrows $300,000 for a home from Bank A. Bank A resells the right to collect on that loan to Bank B. Bank B securitizes that loan with hundreds of others and sells the resulting security to a state pension pla...

Suppose that the banking system in Canada has a required reserve ratio of 10 percent while the banking system in the United States has a required reserve ratio of twenty percent. In which country would $100 of initi...

Explain how an upsloping aggregate supply curve weakens the realized multiplier effect from an initial change in investment spending.5. Why does a reduction in aggregate demand in the actual economy reduce real out...

Refer to the data in the table that accompanies Problem 2. Suppose that the present equilibrium price level and level of real GDP are 100 and $225, and that data set B represents the relevant aggregate supply sched...

Which of the following will shift the aggregate supply curve to the right?a. A new networking technology increases productivity all over the economy.b. The price of oil rises substantially.c. Business taxes fall.d. ...

Assume that securitization combined with borrowing and irrational exuberance in Hyperville have driven up the value of existing financial securities at a geometric rate, specifically from $2 to $4 to $8 to $16 to $3...

Label each of the following scenarios in which there are problems enacting and applying fiscal policy as being an example of either recognition lag, administrative lag, or operational lag.a. To fight a recession, Co...

What are the three basic functions of money? Describe how rapid inflation can undermine money’s ability to perform each of the three functions.2. Which two of the following financial institutions offer checkable de...

Assume that the following asset values (in millions of dollars) exist in Ironmania: Federal Reserve Notes in circulation = $700; Money market mutual funds (MMMFs) held by individuals = $400; Corporate bonds = $300;...

Why do economists nearly uniformly support an independent Fed rather than one beholden directly to either the President or Congress? 10. Identify three functions of the Federal Reserve of your choice, other than its...

Which group votes on the open-market operations that are used to control the U.S. money supply and interest rates?a. The Federal Reserve System.b. The 12 Federal Reserve Banks.c. The Board of Governors of the Federa...

Why might economists be quite concerned if the annual interest payments on the U.S. public debt sharply increased as a percentage of GDP?11. Trace the cause-and-effect chain through which financing and refinancing ...

The following are two hypothetical ways in which the Federal Reserve Board might be appointed. Would you favor either of these two methods over the present method? Why or why not?a. Upon taking office, the U.S. pre...

Suppose that Waxwania is producing $600 of real GDP, whereas the potential real GDP (or full-employment real GDP) is $700. How large is its budget deficit? Its cyclically adjusted budget deficit? Its cyclically adju...

Whenever currency is deposited in a commercial bank, cash goes out of circulation and, as a result, the supply of money is reduced.” Do you agree? Explain why or why not.6. “When a commercial bank makes loans, it cr...

What is the role of the Council of Economic Advisers (CEA) as it relates to fiscal policy? Use an Internet search to find the names and university affiliations of the present members of the CEA.2. What are governmen...

Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. By what percent will the price level increase? Will this inflation be demand-pull inflati...

Refer back to the table in Figure 30.7 in the previous chapter. Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. By what percent will the...

4.A single commercial bank in a multibank banking system can lend only an amount equal to its initial preloan _________________.a. Total reserves.b. Excess reserves.c. Total deposits.d. Excess deposits.5.The two con...

A goldsmith has $2 million of gold in his vaults. He issues $5 million in gold receipts. His gold holdings are what fraction of the paper money (gold receipts) he has issued?a. 1/10.b. 1/5.c. 2/5.d. 5/5.2.A commerci...

What, if any, are the benefits and costs of economic growth, particularly as measured by real GDP per capita?11. LAST WORD Would you expect a country with a total fertility rate of 2.7 to have a growing or a shrinki...

Refer to the table in Figure 28.5 in the book and suppose that the real interest rate is 6 percent. Next, assume that some factor changes such that that the expected rate of return declines by 2 percentage points at...

Using the consumption and saving data in problem 1 and assuming investment is $16 billion, what are saving and planned investment at the $380 billion level of domestic output? What are saving and actual investment ...

Other things equal, what effect will each of the following changes independently have on the equilibrium level of real GDP in the private closed economy?a. A decline in the real interest rate.b.An overall decrease ...

What are the four phases of the business cycle? How long do business cycles last? Why does the business cycle affect output and employment in capital goods industries and consumer durable goods industries more sever...

Suppose an economy’s real GDP is $30,000 in year 1 and $31,200 in year 2. What is the growth rate of its real GDP? Assume that population is 100 in year 1 and 102 in year 2. What is the growth rate of real GDP per c...

True or False: The aggregate expenditures model assumes flexible prices.2. If total spending is just sufficient to purchase an economy’s output, then the economy is: a. In equilibrium.b. In recession.c. In debt.d. I...

Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibriu...

In early 2001 investment spending sharply declined in the United States. In the 2 months following the September 11, 2001, attacks on the United States, consumption also declined. Use AD-AS analysis to show the two...

How would a decrease in the reserve requirement affect the (a) size of the money multiplier, (b) amount of excess reserves in the banking system, and (c) extent to which the system could expand the money supply thro...

What are the major categories of firms that make up the U.S. financial services industry? Are there more or fewer banks today than before the start of the financial crisis of 2007-2008? Why are the lines between th...

Explain why a single commercial bank can safely lend only an amount equal to its excess reserves but the commercial banking system as a whole can lend by a multiple of its excess reserves. What is the monetary mult...

How do each of the following relate to the financial crisis of 2007-2008: declines in real estate values, subprime mortgage loans, mortgage backed securities, AIG.12. What is TARP and how was it funded? What is mea...

How do economists distinguish between the absolute and relative sizes of the public debt? Why is the distinction important? Distinguish between refinancing the debt and retiring the debt. How does an internally hel...

Define the cyclically-adjusted budget, explain its significance, and state why it may differ from the actual budget. Suppose the full-employment, noninflationary level of real output is GDP3 (not GDP2) in the econo...

it was estimated that the total value of all corn-production subsidies in the United States totaled about $4 billion. The population of the United States was approximately 300 million people that year.a. On average...

Is it possible for a country with a regressive tax system to have a tax-spending system that transfers resources from the rich to the poor?13. LAST WORD Does a progressive tax system by itself guarantee that resourc...

Which of thefollowing statements does not characterize the Classical view of business cycles?A.  Laissez-faire is the best policy response to the businesscycle.B.  Fluctuations in business activity are to be expecte...

Which of the following would reduce the money supply: A Commercial banks use excessreserves to buy government bonds from the public. B. Commercial banks loan outexcess reserves. C. Commercial banks sellgovern...

Which of the following is a tool of monetary policy? A. Open Market Operations B. Changes in bankinglaws. C. Changes in tax rates. D. Changes in government spending.

A commercial bank can add to its actual reserves by: A. Lending money to bank customers. B. Buying governmentsecurities from the public. C. Buying governmentsecurities from a Federal Reserve Bank. D. B...

If the money GDP is $600 billion and, on the average, each dollaris spent three times per year, then the amount of money demanded for transactions purposes will be: A. $1800 billion B. $600 billion C. $20...

The total demand for money will shift to the left as a result of: A. A decline in nominal GDP B. An increase in the pricelevel C. A change in the interestrate D. An increase in nominalGDP

The total demand for money will shift to the left as a result of: A. A decline in nominal GDP B. An increase in the price level C. A change in the interest rate D. An increase in nominal GDP

The purchasing power of the dollar: A. Has been increasing in recent years because of economic growth B. Varies directly with the cos-of-living index. C. Is inversely related to the level of aggregate dem...

Federal Reserve System actions that contract or restrict the growth of the nation's money supply for the purpose of reducing or eliminating inflation. A. Easy money policy B. Tight Money Policy C. Federal...

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate? A.   store of value B.   medium of exchange C.   unit of account D.   None of the above is correct.

Fred is considering expanding his dress shop. If interest ratesrise he is A.   less likely to expand. This illustrates why the supply of loanable funds slopes downward. B.   more likely to expand. This illustr...

Suppose that in a closed economy GDP is $11 trillion, consumption is $7 trillion, taxes are $3 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving? A.   $4 trill...

Last year real GDP per person in Olympus was4,500. The year before it was 4,250. What was the growth rate of real GDP per person? A.   7.6 percent B.   5.9 percent C.   6.5 percent D.   None of the above...

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