Question

QUESTION 1

1. This question is answered in Class 3-3. With deposit insurance, banks are not concerned about bank runs. As a result, they can

	a.	keep lower reserves, and lend more at lower interest rates.
	b.	keep higher reserves, and lend more at lower interest rates.
	c.	keep lower reserves, and lend less at higher interest rates.
	d.	keep higher reserves, and lend less at lower interest rates.

1 points   

QUESTION 2

1. This question is answered in Class 3-4. The United States used price controls to prevent inflation during World War II. As a result,

	a.	many goods were rationed, which created surpluses.
	b.	there were surpluses of many goods, which required rationing.
	c.	many goods were rationed, which created shortages.
	d.	there were shortages of many goods, which required rationing.

1 points   

QUESTION 3

1. This question is answered in Class 3-5. What happens if people use their tax cuts to increase their savings?

	a.	The MPC increases, consumption increases less, and fiscal policy is more expansionary.
	b.	The MPC decreases, consumption increases more, and fiscal policy is less expansionary.
	c.	The MPC increases, consumption increases more, and fiscal policy is more expansionary.
	d.	The MPC decreases, consumption increases less, and fiscal policy is less expansionary.

1 points   

QUESTION 4

1. How does the federal funds rate respond to open market operations?

	a.	When the Fed buys bonds, banks have more money to lend, and the federal funds rate increases. When the Fed sells bonds, banks have less money to lend, the federal funds rate decreases.
	b.	When the Fed buys bonds, banks have more money to lend, and the federal funds rate decreases. When the Fed sells bonds, banks have less money to lend, the federal funds rate increases.
	c.	When the Fed buys bonds, banks have less money to lend, and the federal funds rate increases. When the Fed sells bonds, banks have more money to lend, the federal funds rate decreases.
	d.	When the Fed buys bonds, banks have less money to lend, and the federal funds rate decreases. When the Fed sells bonds, banks have more money to lend, the federal funds rate increases.

2 points   

QUESTION 5

1. The budget balance is calculated as tax revenues minus government spending. It is measured as a percentage of GDP. Which of the following is true?

	a.	Both tax increases and government spending increases tend to increase aggregate demand.
	b.	Both tax decreases and government spending decreases tend to increase aggregate demand.
	c.	Tax decreases tend to increase aggregate demand, while government spending increases tend to increase aggregate demand.
	d.	Tax increases tend to increase aggregate demand, while government spending decreases tend to increase aggregate demand.

2 points   

QUESTION 6

1. Consider the annual data from 2015 to 2019, and the monthly data from 2019 to 2020. Which of the following best describes Federal Reserve policy?

	a.	The Fed decreased the federal funds rate throughout this period, which is expansionary monetary policy.
	b.	The Fed increased the federal funds rate throughout this period, which is contractionary monetary policy.
	c.	The Fed reversed course, first raising the federal funds rate, which is expansionary monetary policy, then reducing the federal funds rate, which is contractionary policy.
	d.	The Fed reversed course, first raising the federal funds rate, which is contractionary monetary policy, then reducing the federal funds rate, which is expansionary policy.
	e.	The Fed left the federal funds rate unchanged throughout this period, which is neither expansionary nor contractionary monetary policy.

2 points   

QUESTION 7

1. According to the annual and monthly data, which of the following best describes the government's fiscal policy since 2015?

	a.	The budget balance has moved towards balance, which is an expansionary fiscal policy.
	b.	The budget balance has moved towards balance, which is a contractionary fiscal policy.
	c.	The budget balance has moved towards a larger deficit, which is an expansionary fiscal policy.
	d.	The budget balance has moved towards a larger deficit, which is a contractionary fiscal policy.
	e.	The budget balance has not changed, which is neither expansionary nor contractionary fiscal policy.

2 points   

QUESTION 8

1. Use the annual data and monthly data in the worksheet for 2015 through December 2019. Which of the following best describes the economy during this period?

	a.	The unemployment rate was near 5% and output was close to potential in 2015. Growth continued for many reasons, including optimistic lenders and expansionary fiscal policy. The Federal Reserve began to restrain growth, concerned that the all-items inflation rate was rising. By 2019, however, real GDP growth slowed, all-items inflation fell and financial markets became less optimistic. The Fed switched to expansionary monetary policy in mid-2019.
	b.	The unemployment rate was near 5% and output was close to potential in 2015. Falling unemployment increased consumer incomes, which encouraged more consumer spending. Expansionary fiscal and monetary policy also encouraged growth, despite the continuous pessimism of lenders. The core rate of inflation remained nearly stable, while the unemployment rate fell well below 5%. In 2019 the Fed reversed course, and moved to contractionary monetary policy.
	c.	The unemployment rate was near 5% and output was close to potential in 2015. Unfortunately, this could not be sustained, as output fell back below potential, as shown by the falling unemployment rates. There were many reasons, including contractionary fiscal and monetary policy, and ever-increasing pessimism among lenders. Low inflation was a bright spot, but by 2019 the core rate had risen above the all-items rate, a sign of future trouble.

3 points   

QUESTION 9

1. Consider the monthly data, including the estimates for March 2020, and the information in the articles. Which of the following is the best analysis of and prediction for the goods market in the current U.S. economy for the next few months? Use the all-items inflation rate for the P axis.

	a.	Aggregate demand has decreased with decreases in labor supply and business closures. Aggregate supply has decreased more, with declining consumption spending. Output was above potential at the beginning of March, but will be below potential by the end of March and after.
	b.	Aggregate supply has decreased with decreases in labor supply and business closures. Aggregate demand has decreased more, with declining consumption spending. Output was above potential at the beginning of March, but will be below potential by the end of March and after.
	c.	Aggregate demand has decreased, with declining consumption spending. Aggregate supply has decreased more with decreases in labor supply and business closures. Output was above potential at the beginning of March, and remained above potential by the end of March and after.
	d.	Aggregate supply has decreased, with declining consumption spending. Aggregate demand has decreased more with decreases in labor supply and business closures. Output was above potential at the beginning of March, and remained above potential by the end of March and after.

Answer 1

I will answer only Q1 as per HomeworkLib policy. Kindly respect HomeworkLib policy

Q1) a)keep lower reserves and lend more at lower interest rates.

During bank run depositors rus to the banks to withdraw their money fearing bank failure.Deposit insutrance provides protection to the depositors money. With deposit insurance banks do not fear bank run . But banks try to keep their reserves as low as possible because the reserves will stay idle in the vaults and will not earn money for the banks.If they loan the reserves to customers they will get interest on the money . So banks will keep their reserves low and lend more to customers.