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Which of the following is a tenet of supply-side economics?
a. High marginal tax rates severely discourage work, saving, and investment.
b. Increases in social security taxes and other business taxes shift the aggregate supply curve to the right.
c. The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate.
d. Transfer payments increase incentives to work.

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Sonia Dhawan
Sonia DhawanLv10
25 Sep 2020

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Related questions

Which of the following is a tenet of supply-side economics?
 
a. Higher marginal tax rates severely discourage work, saving, and investment.
b. Increases in social security taxes and other business taxes shift the aggregate supply curve to the right.
c. The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate.
d. Transfer payments increase incentives to work.

1) Modern mainstream macroeconomists agree with the monetarists that:

a) the Fed should increase the money supply at a fixed annual rate.

b) velocity is highly stable.

c) fiscal policy is largely ineffective.

d) "money matters" in the macroeconomy.

2) The velocity of money is the:

a) relationship between the money supply and the price level.

b) number of times per year the average dollar is spent on final goods and services.

c) relationship between asset and transactions demands for money.

d) price level divided by aggregate supply.

3) When most consumers and firms reduce spending only because they expect other consumers and firms to reduce spending, and a recession results:

a self-correction has occurred.

an adverse aggregate supply shock has occurred.

a coordination failure has occurred.

a real-business-downturn has occurred.

4) (Last Word) Suppose that real GDP falls to 2 percent below potential GDP. Then, according to the Taylor rule, the Fed should reduce the Federal funds, relative to the current rate of inflation, by:

1/2 percentage point.

1 percentage point.

2 percentage points.

4 percentage points.

5) Critics of supply-side economics:

argue that a tax cut will increase aggregate supply by more than it increases aggregate demand.

contend that the relationship between tax rates and economic incentives is small and of uncertain direction.

believe that a decline in tax rates will increase tax revenues.

point out that tax cuts enable households to substitute work for leisure.

1.  The Federal Funds Rate is set by the Federal Reserve on the first business day of each month by faxing the rate to the member banks of each Federal Reserve District.

A. True

B. False

 

2. The Federal Reserve is a single Central bank located on Wall Street in New York City.

A. True

B. False

 

3. Which of the following is NOT true about the Federal Reserve System?

A. Terms of service of the members of the Board of Governors are longer than the number of years that a two-term President of the United States would serve.

B. The Federal Reserve System is the nation's central bank and is comprised of 12 Federal Reserve Banks that serve as bankers' banks.

C. Some of the main functions of the Federal Reserve System include the authority to control the money supply, to issue currency, to set reserve requirements, and to hold reserves.

D. While Congress controls the actions of the Federal Reserve, the President has the authority to appoint and remove private banks from the Federal Reserve System.

 

4. Which of the following is NOT true about restrictive monetary policy?

A. A restrictive monetary policy seeks to raise the federal funds rate.

B. A restrictive monetary policy seeks to expand the money supply.

C. A restrictive monetary policy seeks to raise the Federal Funds Rate by selling government bonds or raising the reserve requirement ratio or increasing the discount rate.

D. A restrictive monetary policy is used when the government is concerned about suddenly increasing inflation.

 

5. Which of the following statements is NOT true about contractionary fiscal policy?

A. Contractionary fiscal policy consists of reductions in government spending or increases in taxes.

B. Contractionary fiscal policy can include both reductions in government spending or increases in taxes.

C. Contractionary fiscal policy seeks to shift the Aggregate Demand curve to the right.

D. Contractionary fiscal policy is used when the government seeks to reduce suddenly surging inflation.

 

6. The Federal Reserve creates money by printing the amount of desired new money and distributing it via armored trucks and high-security railways to Federal Reserve District Banks.

A. True

B. False

 

7. If the Fed feared a looming recession was just around the corner, which of the following actions would it "NOT" consider?

A. The Fed would raise the discount rate.

B. In order to influence prevailing commercial interest rates to fall, the Fed would buy large amounts of government securities.

C. In order to expand the money supply (which influences prevailing commercial interest rates to fall), the Fed would either buy large volumes of government bonds, lower the reserve requirement or cut the discount rate.

D. The Fed would seek to expand the money supply because, in so doing, the federal funds rate would fall and that would stimulate commercial interest rates to fall.

 

8. Which of the following statements is NOT true about the ability of the Federal Reserve System to expand the money supply?

A. The Federal Reserve System uses the fractional nature of the banking system to create money in order to expand the money supply.

B. The money multiplier defines the relationship between new excess reserves throughout the banking system and the creation of money by banks in the system. It is calculated by dividing the number 1 by the Required Reserve Ratio. [1/rr].

C. If the required reserve ratio is 20%, then $80 billion in new excess reserves will create $400 billion in bank system lending throughout the entire banking system.

D. If the reserve requirement is 100%, then the banks can generate 100% in new excess reserves.

 

9. Which of the following is NOT true about the tools of monetary policy?

A. The Fed can alter the money supply through open market operations, changes in the reserve ratio or adjustments to the discount rate.

B. Lowering the reserve ratio would expand the money supply.

C. Raising the discount rate would restrict the money supply.

D. Adjusting the reserve requirement is the most important day-to-day method for controlling the nation's money supply.

 

10. If the Federal Reserve wishes to hold off a feared recession, it will sell large volumes of government bonds.

A. True

B. False

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