Which of the following is false about budget deficits?

• They canaffect long run RGDP.
• They represent the difference between tax revenue and government expenditures.
• They are financed with tax revenue or new debt.
• They typically happen when using contractionary fiscal policy.

Which of the following is NOT a step in the process of lending federal funds?

• The Fed gives short term loans to banks to help them meet reserve requirements.
• The FOMC sets a target for the federal funds rate.
• At the end of the day, deposits and withdrawals influence the reserve level.
• Banks with excess reserves loan money for one night to banks who cannot meet the reserve.

Which of the following makes the Federal Reserve different from central banks in other countries?

• The Federal Reserve is not directly controlled by thefederal government.
• The Federal Reserve has tools to manage the money supply.
• The Federal Reservecan expand the money supply during recessions.
• The Federal Reserve works to combat inflation.

Which of the following is NOT a form of treasury security?

• Yield
• Notes
• Bonds
• Bills

Which of the following is NOT a way that the Fed uses the open market to control the money supply?

• The Fed buys U.S. Treasury securities.
• The Fed dictates the amount of money that banks must keep in their vaults.
• To remove money from circulation, the Fed sells U.S. Treasury securities for cash.
• The Fed gives bondholders cash in exchange for securities.

What does theexpression Y - (C +T) represent?

• Government savings
• GDP
• Public savings
• Investments

Which of the following can offset rising interest rates due to government borrowing?

• Promising future increases in government spending
• Reducing the money supply
• Expansionary monetary policy
• Lowering taxes

If a bank's reserve requirement is 5%, then $100 of M0 will lead to which of the following as the amount of M1?

• $200
• $50
• $2,000
• $5

Which of the following is the reason the United States had been opposed to the idea of central banks in the past?

• The risk of runs and panics was still too high.
• The value of currency was uncertain.
• It was easier to make money trading currency using the old banking methods.
• The British central bank had exerted control over the colonies.

Which of the following statements appliesto thediscount rate?

• This rate is used when banks borrow directly from the Fed.
• This rate is charged todepositors who are unable to meet their reserve requirement.
• The fed funds rate is the same as this rate.
• The Fed does not directly control this rate.

Which of the following is true about a fractional reserve banking system?

• The central bank does not allow for this type of system.
• It is likely to fail as most people demand all of their money each day.
• It allows banks to loan out a portion of deposits and therefore create money.
• There are no regulations concerning the portion of reserves banks must hold.

Select the example below that is part of contractionary monetary policy.

• Policies that reduce interest rates
• Lowering the reserve requirement
• Policies that can reduce excessive inflation
• Open market purchases of treasury securities

Which statement below about expansionary fiscal policy is true?

• If it is based on a tax cut, it will trigger the multiplier effect.
• It generally has a negative effect on GDP.
• It could include lowering interest rates.
• It could include decreasing the reserve requirement.

If the MPC is 0.75 and the government increases spending by $100 billion, the effect this change has on the economy will be which of the following?

• There will be an increase of $100 billion in economic activity.
• There will be an increase of $133.3 billion throughout the economy.
• There will be anincreaseof $400 billion in economic activity.
• There will be an increase of $75 billion in economic activity.

The terms M0, M1, M2 classifymoney according to which of the following?

• Level of liquidity
• Reserve requirement
• Adherence to the gold standard
• Unit of account