Exam 12: Short-Term Economics Fluctuations: An Introduction

In an economy where planned aggregate spending is given by PAE = 5,500 + 0.6Y - 20,000r, the interest rate is currently 2 percent (0.02). If potential output equals 8,000, the central bank must ______ the interest rate to close the ______ gap.

Higher nominal interest rates ______ the amount of money demanded and a higher price level ______ the amount of money demanded.

Deposit insurance is a system in which the government guarantees that:

Three macroeconomic factors that affect the demand for money are:

A higher real interest rate ______ saving and ______ consumption spending.

The central bank of the United States is:

One problem with using monetary policy to address "bubbles" in asset markets is that:

Any value of the money supply chosen by the Federal Reserve implies a specific value for ______.

The equilibrium quantity of money in circulation is determined by:

In a certain economy, the components of planned spending are given by: C = 500 + 0.8(Y - T) - 300r Ip = 200 - 400r G = 200 NX = 10 T = 150 Given the information about the economy above, which expression below gives induced expenditures?

The benefit of holding money is _______, while the opportunity cost of holding money is _______.

Which of the following would be expected to decrease the demand for money in the U.S.?

The decision about how much money to hold is an application of the:

During the Christmas shopping season, the demand for money increases significantly. If the Fed takes no actions to offset the increase in money demand, then nominal interest rates will ____.

When Argentines increase their savings in U.S. dollars, the U.S. money:

The Federal Reserve can decrease the money supply by:

To close a recessionary gap, the Fed ______ interest rates which ______ planned aggregate spending and ______ short-run equilibrium output.

Higher nominal interest rates ______ the amount of money demanded and higher real income ______ the amount of money demanded.

Innovations in the United States, such as credit cards, debit cards, and ATMs have:

If the Federal Reserve is currently paying 1% interest on bank reserves, but then reduces that interest rate to 0.5%, banks may decide to hold ______ reserves, and the money supply may _____.