Subsidies for construction of : [ Choose ] w factories BU|Id|ngl infrastructure such as [ Choose ] v road, bridges, and dams. Restrictions on the [ Choose | v development of forested land Falctorles slare banned from [ Choose ] v using fossil fuels. More funding for education [ Choose ] v Loans for firms to develop new methods of [ Choose ] v production. Making the financial market more efficient [ Choose ] v Government encourages people to [ Choose ] v exercise more and stay healthy. Question 14 6 pts For each of the following separate scenarios, determine if the money supply of the economy will increase or decrease. Fed conducts an open market purchase of [ Choose ] v government bonds. Fed increases the required reserve ratio. [ Choose ] v Many households withdraw their money [ Choose | v from banks and put their money at home. Fed decreases the Fed Funds rate. [ Choose ] v Question 15 4.5 pts For each of the following separate scenarios, determine the associated shortcoming of fiscal policy. The government has increased taxes to control inflation. Yet it will take a long time [ Choose ] v for the policy to have any effects on the economy. The government cuts taxes now. Yet [ Choose ] v people save more as they expect the government will raise taxes in the future. Households save more and consume less [ Choose ] & because government borrowings drive up the interest rate. Question 16 3 pts Consider the following AD-AS graph. An event happens and the economy goes from point A to point B. LRAS curve does not shift. Price level Yw Real GDP (Y) a. From point A to point B, does real GDP rise, fall, or remain unchanged? [ Select ] v b. Which point is the equilibrium in long run after the event? [ Select ] v Question 17 2 pts Nominal GDP of country B grows from $30 billion to $33 billion between 2016 and 2017. Suppose inflation rate is 3% and population growth rate is 1.5% between 2016 and 2017. Calculate the economic growth rate between 2016 and 2017. Answer: The economic growth rate = % Question 18 2 pts Suppose annual growth rate of real GDP per capita is 6%. According to the rule of 70, how long does it take for the real GDP per capita to double? (Round your answer to the nearest 1 decimal place) Answer: It will take years for real GDP per capita to double. Question 19 3 pts Households save more and consume less. (i) Does MPC increase or decrease? [Select] v (i) Would expansionary fiscal policy be more effective or less effective? [ Select ] v Question 20 2 pts On the balance sheet of Bank E, it has $150 million of deposits as a liability. Suppose Bank E has $50 million of reserves, and rr = 30%. How much money can Bank E loan out at most? Answer: Bank E can loan out at most $ million. Question 21 2 pts MPC = 0.8. If the government cuts taxes by $20 million, how much will the AD increase with the spending multiplier effects? (Hint: the initial spending is not $20 million) Answer: Increase in AD = $ million. Question 22 0 pts Suppose a country is running out of natural resources, which leads to a decrease in the production capacity of the economy. Full-employment output also decreases. (a) does LRAS shift to the left, or shift to the right? [Select] (b) what happens to the price level? [Select] v (This question is a bonus question. This question is worth 2 points) Question 23 3 pts (a) In country A, the government issues paper bills as money. The value of money is linked to the price of silver. People can go to the government to exchange a guaranteed value of silver. What kind of money is country A using? [ Select ] v (b) In country B, the government mints gold coins as money. What kind of money is country B using? [Select] v Question 24 2 pts MPC = 0.75. The government wants to increase AD by $500 million. With the spending multiplier effects, how much should the government increase spending? Answer: The increase in government spending should be $ million. Question 25 6 pts In country A, technological advancement occurs. The effects can be described by the following graph. Before the technological advancement, the economy is at point A. Price LRAS, LRAS, level (P) Real GDP (Y) (a) Which curve(s) shift(s) in which direction due to the technological advancement? [Select] :::: Consider the following balance sheet of Bank A. Assume the required reserve ratio is 10%. Use the given information to answer questions 29 - 32. Assets Liabilities and owner's equity Loans $5,000 Deposits $6,000 Reserves $700 Borrowings $500 US Treasury securities $1,500 Owner's equity $1,200o 1 Total liabilities and owner's otal Assets $7,700 equity Question 29 2 pts Calculate the amount of required reserves. Answer: The amount of required reserves = $ Question 30 1.5 pts Calculate the amount of excess reserves for Bank A Answer: The amount of excess reserves for Bank A = $ Question 31 1.5 pts Assume that Bank A loans out the entire amount of excess reserve, what is the maximum amount of new money created for the economy through the money multiplier effects? Assume that rr =10% for all banks. Answer: The total amount of new money created for the economy = $ Question 32 1.5 pts Suppose the customers of Bank A withdraw some money. Will the maximum amount of money that Bank A is able to lend out increase or decrease? [ Select ] v Suppose the president of a country uses $250 million to build a highway. The expenditure is entirely financed by borrowing. The government did not borrow any money before building the highway. Before the government borrowing, the equilibrium amount of savings = $600 million. After the government borrowing, the equilibrium amount of savings = $700 million. Use the given information to answer questions 33 - 38. Question 33 2 pts How would this expenditure affect the loanable funds market? O demand for loanable funds shifts to the right O demand for loanable funds shifts to the left O supply of loanable funds shifts to the right Question 34 1.5 pts How much is the amount of firms' investments before the government borrowing? Answer: The amount of firms' investments = $ million. Question 35 1.5 pts How much is the amount of firms' investments after the government borrowing? Answer: The amount of firms' investments = $ million. Question 36 1.5 pts Does equilibrium interest rate increase or decrease after the government borrowing? [ Select] v Question 37 1.5 pts Assume complete crowding out, how much is the decrease in household consumptions after the government borrowing? Answer: The decrease in household consumptions = $ million. Question 38 1.5 pts Explain why crowding out will reduce the effects of expansionary fiscal policy. O AD increases significantly because of the crowding out. O AD does not increase much or not increase at all because of crowding out. O Crowding out will lead to increase in firms investments, and AD increases significantly. O Crowding out will cause AD curve to shift to the right further. Consider the following table which presents the data of country B. Suppose an event happens. The event is that consumer confidence increases. Due to the increase in consumer confidence, the economy is overheating. Use the given information to answer questions 39 - 41. Short run after thelLong run after Real GDP (USD) 3.0 trillion 3.5 trillion Question 39 1.5 pts Find the natural rate of unemployment. Answer: The natural rate of unemployment = % Question 40 2 pts In short run after the event happens, which curve(s) in the AD-AS model shift(s) to which direction? [Select] v Question 41 4.5 pts The economy is overheating due to the increase in consumer confidence. In short run after the increase in consumer confidence, the government wants to implement a policy to bring the economy back to the original equilibrium before consumer confidence increases. (a) Should the government increase or decrease government spending? [ Select ] v (b) In an AD-AS graph, which curve will shift to which direction after the policy? [ Select] v (c) After the policy, will the price level be greater than or less than 1057 [ Select ] v Not saved Submit Quiz