Which of the following individuals would be most negatively affected by anticipated inflation?
A) a student who borrows 10,000 at a nominal interest rate of 5 to finance educational expenses
B) a full-time employee at a pizza parlor who makes more than the minimum wage
C) a retired railroad engineer who receives a fixed income payment every month
D) a union contractor whose pay is adjusted based on changes in the CPI
Ques. 2If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in
A) government purchases.
B) oil prices.
C) the money supply and a decrease in interest rates.
D) taxes.
Ques. 3Inflation usually increases during a recession and decreases during an expansion.
Indicate whether the statement is true or false
Ques. 4Which of the following is not a function of the Federal Reserve System, or the Fed?
A) acting as a lender of last resort
B) acting as a banker's bank
C) taking actions to control the money supply
D) insuring deposits in the banking system
E) performing check clearing services
Ques. 5Refer to Figure 23-4. Potential GDP equals 500 billion. The economy is currently producing GDP1 which is equal to 450 billion. If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?
A) -40 billion B) -10 billion C) 10 billion D) 40 billion
Ques. 6Refer to Table 26-4. Suppose the following table illustrates the values of real and potential GDP and the price level if the Fed does not vote to change their current policy to be more contractionary or expansionary.
If the Fed wants to keep real GDP at its potential level in 2017, should the Fed use a contractionary or expansionary policy? How should it conduct open market operations to achieve its goal?
Ques. 7The seven members of the Board of Governors of the Federal Reserve are appointed by
A) Congress.
B) the Treasury Department.
C) the President.
D) leaders in the banking industry.
E) the Governors of the States.
Quick Reply
