The money supply is backed Multiple Choice 02:29:52 O by the government's ability to control the supply of money and therefore to keep its value relatively stable. O by government bonds. O dollar-for-dollar by gold and silver. O by gold reserves representing a fraction of the total value of dollars in circulation.2 The amount by which federal tax revenues exceed federal government expenditures during a particular year is the Multiple Choice 02-29:29 O Federal Reserve. O budget deficit. O budget surplus. O public debt.3 Which of the following is a tool of monetary policy? Multiple Choice 02-29:12 O open-market operations O changes in banking laws O changes in tax rates O changes in government spending1 Other things equal, an expansionary monetary policy will shift the economy's aggregate demand curve to the right. True or False True False / \"x l 2 02:23:57 I x J 5 An appropriate fiscal policy for severe demand-pull inflation is Multiple Choice 02-28:41 O an increase in government spending. O depreciation of the dollar. O a reduction in interest rates. O a tax rate increase.6 Money functions as Multiple Choice 02:28:25 O a store of value. O a unit of account. O a medium of exchange. O a store of value, a unit of account, and a medium of exchange.7 Government Year Spending Tax Revenues GDP 1 $ 450 $ 425 $ 2,000 2 500 150 3,000 02:28:09 3 500 590 4,006 4 620 5,006 UT 680 580 4,800 6 500 520 5,000 The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. The budget deficit in year 3 is Multiple Choice O $10 billion. O $1,190 billion. O $90 billion. O $100 billion.8 Upon which of the following industries is a restrictive monetary policy,r likely,r to be most effective? Multiple Choice \\ J, | 2 01-2153 | R J 0 furniture 0 clothing 0 food processing 0 residential construction 9 The total demand for money will shift to the left as a result of Multiple Choice r\" "N. | 2 ountsl K. J O a decline in nominal GDP. an increase in the price level. 0 a change in the interest rate. an increase in nominal GDP. Which of the following is a tool of monetary policy? 10 Multiple Choice 8 02:27:13 O open-market operations O changes in banking laws O changes in tax rates O changes in government spending11 When people withdraw money from their deposits in the banking system, the Multiple Choice 02:26:58 O excess reserves of the banking system will decrease. O excess reserves of the banking system will increase. O excess reserves of the banking system will not be affected. O money supply will immediately decrease.12 If the Fed were to reduce the legal reserve ratio, we would expect Multiple Choice X 02:26:45 O lower interest rates, an expanded GDP, and a higher rate of inflation. O lower interest rates, an expanded GDP, and a lower rate of inflation. O higher interest rates, a contracted GDP, and a higher rate of inflation. O higher interest rates, a contracted GDP, and a lower rate of inflation.In a fractional reserve banking system, 13 Multiple Choice X 02-26:33 O bank panics cannot occur. O the monetary system must be backed by gold. O banks can create money through the lending process. O the Federal Reserve has no control over the amount of money in circulation.Contractionary fiscal policy is so named because it 14 Multiple Choice 02-26:18 O involves a contraction of the nation's money supply. O necessarily reduces the size of government. O is aimed at reducing aggregate demand and thus achieving price stability. O is expressly designed to expand real GDP.Checkable deposits include 15 Multiple Choice 02:26:01 O both large- and small-denominated time deposits. O the deposits held by banks and thrifts on which checks can be written. O only the checkable deposits of commercial banks. O only the checkable deposits of thrift institutions.Discretionary fiscal policy refers to 16 Multiple Choice r \"x | 2 0:25:43 l k I 0 any change in government spending or taxes that destabilizes the economy. 0 the authority that the president has to change personal income tax rates. 0 intentional changes in taxes and government expenditures made by Congress to stabilize the economy. the changes in taxes and transfers that occur as GDP changes. The four main tools ofrnonetary policy are 17 Multiple Choice .\\ r | 2 0:25:32 | x. J O tax-rate changes, the discount rate, open-market operations, and the federal funds rate. Q tax-rate changes, changes in government expenditures, open-market operations. and interest on excess reserves. 0 the discount rate, the reserve ratio, interest on excess reserves, and open-market operations. changes in government expenditures, the reserve ratio. the federal funds rate. and the discount rate. A commercial bank buys a $10,000 government security from a securities dealer. The bank pays the dealer by increasing the dealer's checkable deposit balance by $10,000. The money supply has 18 Multiple Choice 8 02-25:18 O increased by $10,000. O decreased by $10,000. O not been affected. O increased by $10,000 multiplied by the reserve ratio.The value (or purchasing power) of money increases when the price level increases. 19 True or False 02:25:04 True FalseSuppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth? 20 Multiple Choice 02-24:51 O A congressional proposal to incur a federal surplus to be used for the retirement of public debt. O Reductions in agricultural subsidies and veterans' benefits. O Postponement of a highway construction program. O Reductions in federal tax rates on personal and corporate income