ECO349H5 Lecture Notes - Lecture 4: Real Estate Broker, Fiscal Policy, Monetary Policy

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cyancod662

15 May 2017

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Related Questions

1.The classical theory of inflation

A. Is also known as the quantity theory of money.

B.was developed by some of the earliest economic thinkers.

C.is used by most modern economists to explain the long-run determinants of the inflation rate.

D.All of the above are correct.

2.To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the

A.quantity theory of money.

B.price-index theory of money.

C.theory of hyperinflation.

D.disequilibrium theory of money and inflation.

3.When the price level rises, the number of dollars needed to buy a representative basket of goods

A.increases, and so the value of money rises.

B.increases, and so the value of money falls.

C.decreases, and so the value of money rises.

D.decreases, and so the value of money falls

4.The supply of money is determined by

A.the price level.

B.the Treasury and Congressional Budget Office.

C.the Federal Reserve System.

D.the demand for money.

6.Economic variables whose values are measured in monetary units are called

A.dichotomous variables.

B.nominal variables.

C.classical variables.

D.real variables.

7.Economic variables whose values are measured in goods are called

A.dichotomous variables.

B.nominal variables.

C.classical variables.

D.real variables.

7.The classical dichotomy refers to the idea that the supply of money

A. is irrelevant for understanding the determinants of nominal and real variables.

B.determines nominal variables, but not real variables.

C.determines real variables, but not nominal variables.

D.is a determinant of both real and nominal variables.

8.According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

A.the price level

B.nominal wages

C.nominal GDP

D.All of the above are correct.

9.Monetary neutrality implies that an increase in the quantity of money will

A.increase employment.

B.increase the price level.

C.increase the incentive to save.

D.not increase any of the above.

10.The velocity of money is

A.the rate at which the Fed puts money into the economy.

B.the same thing as the long-term growth rate of the money supply.

C.the money supply divided by nominal GDP.

D.the average number of times per year a dollar is spent.

11.If M = 4,000, P = 1.5, and Y= 6,000, what is velocity?

A.2.25

B.3.00

C.6.50

D.None of the above is correct.

12.According to the assumptions of the quantity theory of money, if the money supply increases by 5 per cent, then

A.nominal and real GDP would rise by 5 per cent.

B.nominal GDP would rise by 5 per cent; real GDP would be unchanged.

C.nominal GDP would be unchanged; real GDP would rise by 5 per cent.

D.neither nominal GDP nor real GDP would change.

13.The inflation tax refers to

A.the revenue a government creates by printing money.

B.higher inflation which requires more frequent price changes.

C.the idea that other things the same, an increase in the tax rate raises the inflation rate.

D.taxes being indexed for inflation.

14.The inflation tax falls most heavily on

A.those who hold a lot of currency and accounts for a large share of U.S. government revenue.

B.those who hold a lot of currency but accounts for a small share of U.S. government revenue.

C.those who hold little currency and accounts for a large share of U.S. government revenue.

D.those who hold little currency but accounts for a small share of U.S. government revenue.

15.The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the

A.Friedman Effect.

B.Hume Effect.

C.Fisher Effect.

D.None of the above is correct.

16.The nominal interest rate is 3 per cent and the inflation rate is 2 per cent. What is the real interest rate?

A.6 per cent

B.5 per cent

C.1.5 per cent

D.1 per cent

17.Which of the following helps to explain why the inflation fallacy is a fallacy?

A.Increases in the price level can be created by increases in money demand.

B.Nominal incomes tend to rise at the same time that the price level is rising.

C.As the price level rises, the value of a dollar falls.

D.Inflation only changes nominal variables.

18.The shoe-leather cost of inflation refers to

A.the re distributional effects of unexpected inflation.

B.the time spent searching for low prices when inflation rises.

C.the waste of resources used to maintain lower money holdings.

D.the increased cost to the government of printing more money.

19.Which of the following is an example of menu costs?

A.deciding on new prices

B.printing new price-lists

C.advertising new prices

D.All of the above are examples of menu costs.

20.Which of the following are U.S. taxpayers allowed to adjust for inflation for income taxes?

A.both interest in income and capital gains.

B.interest income but not capital gains.

C.capital gains but net interest income.

D.neither interest income nor capital gains.

21.You put money into an account and earn a real interest rate of 4 per cent. Inflation is 2 per cent, and your marginal tax rate is 20 per cent. What is your after-tax real rate of interest?

A.1.2 per cent

B.2.8 per cent

C.4.8 per cent

D.None of the above is correct.

22.Which of the following is correct? Inflation

A.impedes financial markets in their role of allocating resources.

B.reduces the purchasing power of the average consumer.

C.generally increases after-tax real interest rates.

D.is most costly when anticipated.

23.Wealth is redistributed from creditors to debtors when inflation is

A.high, whether it is expected or not.

B.low, whether it is expected or not.

C.unexpectedly high.

D.unexpectedly low.

amberdinosaur553

Consider an economy described by the following equations: C = 200 + 0.75(Y-T) where I = 200 - 25r, G = 100, T = 100, L(r, Y) = Y - 100r M = 1000 P = 2

(a) Derive the equation for the IS curve

(b) Derive the equation for the LM curve.

(d) What is the government purchases multiplier?

(e) What is the tax multiplier?

(f) Suppose that government purchases are raised from 100 to 150. How does the IS curve shift? What are the new equilibrium interest rate and level of output?

(g) Suppose instead that the money supply is raised from 1,000 to 1,200. How does the LM curve shift? What are the new equilibrium interest rate and level of output?

(h) With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4. What happens? What are the new equilibrium interest rate and level of output?

raspberrymacaw591

1. Is opportunity cost always present?

2. What is the problem at the heart of economics?

3. What is included in GDP and what is excluded?

4. If the consumer price index increases, how does this impact the average citizen?

5. What is the business cycle?

6. What is the relationship among the potential output level of the economy, the natural rate of unemployment, cyclical unemployment, structural unemployment, and frictional unemployment?

7. What did Keynesians believe about investment and the adjustment of wage rates?

8. What did pre-Keynesian believe about the market and its ability to pull itself out of a recession?

9. What role do investments in human capital, physical capital, technology development, and improving institutional quality play in creating economic growth?

10. How does a fractional reserve banking system work and what is the relationship between the money multiplier and the reserve requirement?

Wh What is fiscal policy?

12. What are the relations between government spending, the marginal propensity to consume, the marginal propensity to save, and the multiplier effect?

13. What are some of the problems with using fiscal policy in an effective manner?

14. What role did the Great Depression play in changing the government%u2019s approach to the economy?

15. What is stagflation and how did it challenge Keynesian orthodoxy?

16. What is supply side economics and how does it function?

17. What is the crowding out effect?

18. What is the new classical approach to the stimulatory impact of fiscal policy implemented through deficit spending?

19. What role does the department of the Treasury play in the American economy?

20. What role does the Federal Reserve Banking system play in managing the American policy?

21. What are the tools that the Fed uses to influence the money supply?

22. What approach to the money supply do those embracing monetarism suggest?

23. What dangers does monetary policy pose for the economy?

24. How do shifting price levels impact debtors and savers?

25. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a tax cut?

26. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a tax increase?

27. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of an increase in government spending?

28. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of a cut in government spending?

29. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of an expansionary monetary policy?

30. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a restrictive monetary policy?

31. How do automatic stabilizers influence the economy?

32. How does a deficit and large debt influence the economy?

33. What is the relationship between the expansion of the money supply and inflation?

34. What is the relationship between interest rates and inflation rates?

35. How do expectations impact the effectiveness of monetary policy?

36. What restricts the ability of the Fed to purchase U.S. securities?

37. What is Money?

38. What is the primary motivation of bankers and banks?

39. What is the impact of higher interest rates on the value of a currency and a nation%u2019s net exports?

40. What is the Conference Board and what does it do?

41. Why do countries willing lend the U.S. government money despite the relatively large debt to GDP ratio of the United States?

42. How does trade contribute to growth?

43. How do institutions contribute to growth?

44. How does the relative size of government contribute to growth?

45. What is the Philips Curve?

46. How does the rule of 70 work?

47. Do High Income countries always grow at a faster pace than lesser developed countries?

48. How do high levels of inflation effect growth?

49. Can you identify the amount of growth in an economy by using the percentage change formula?

50. What countries are presently experiencing high rates of economic growth?

12.

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ECO349H5 Lecture Notes - Lecture 4: Real Estate Broker, Fiscal Policy, Monetary Policy

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