Unit 4 AP Macro

What's his name & Economic School of Thought?

• John Keynes

  Fiscal

• Adam Smith

  Monetarist

• Adam Smith

  Classical

• Milton Friedman

  Monetarist

Which of the following will happen if the central bank of a nation purchases government bonds on the open market?

• The monetary base will increase and the money supply will not change.

• The monetary base will increase and the money supply will increase.

• The monetary base will decrease and the money supply will increase.

• The monetary base will decrease and the money supply will not change

On the island of Mabera, the local money is called “favoli.” The price of every good in Mabera is expressed as the number of favolis needed to buy the good. The use of favolis to express the price of goods is ...

• Medium of exchange

• Means of payment

• Unit of account

• Store of value

Which of the following is a primary function of money in an economy?

• Medium of exchange

• Store of value

• Unit of account

• All of the above

If the reserve requirement is 10% and a bank receives a new deposit of $1,000, how much can the bank lend out?

• $100

• $900

• $1,000

• $10,000

What is the main tool used by the Federal Reserve to control the money supply?

• Open market operations

• Changing the discount rate

• Altering the reserve requirement

• Printing more money

In the short run, an increase in aggregate demand is most likely to cause which of the following?

• An increase in unemployment

• A decrease in the price level

• An increase in the price level

• A decrease in real GDP

Which of the following best describes the concept of 'liquidity'?

• The ease with which an asset can be converted into cash

• The interest rate charged by banks

• The total amount of money in circulation

• The value of a country's exports

What happens to the value of money when the inflation rate increases?

• The value of money increases

• The value of money decreases

• The value of money remains the same

• The value of money becomes unpredictable

Which of the following is an example of fiscal policy?

• Increasing the money supply

• Decreasing the interest rate

• Increasing government spending

• Reducing the reserve requirement