In macroeconomics,________describes a situation in which two people each want to exchange some good or service that the other can provide.

A double coincidence of wants

Which of the following is omitted in a barter transaction?

money

Bill performs plumbing upgrades for Alice in exchange for incorporating his business.

Double coincidence of wants

____ is a completely inadequate mechanism ______in a modern and advanced economy.

Barter, for trying to coordinate trades

In macroeconomics, a ___ describes the common way in which market values are measured in an economy.

Unit of account

In modern economies, credit cards are a _____ because of their wide acceptance as method of payment for both goods and services.

Medium of exchange

If mollusk shells were accepted as a method of payment in modern day markets, what economic role would they play in the financial system?

Medium of exchange

Which of the following is a valid criticism of the use of money as store as a store of value in modern economies?

Annual inflationary loss of buying power

Which of the following would be classified in the M1 category of the money supply?

Demand deposits

With respect to measuring the money supply, which of the following terms describes a checking account?

Demand deposits

_______are included in the aggregate amount of MI money currently in circulation.

Traveler’s checks

Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?

M1

In modern economies, ______ receive money from savers and provide fund to borrowers.

financial intermediaries

_______are funds that the bank keeps on hand that are not loaned out or invested in bonds.

Reserves

The process of banks making loans in financial capital markets is intimately tied to the _________.

creation of money

Banks typically come under financial stress because of _______.

a widespread decline in the value of their assets

If loans become far less available, then sectors of the economy ______, like business investment home construction, and car manufacturing can be dealt a crushing blow.

that depend on borrowed money

________ that require the depositor to commit to leaving their funds in the bank for a certain period of time, in exchange for a higher rate of interest. They are also called ________.

certificates of deposit, time deposits

The term ______ describes the proportion of deposits that the bank must hold in the form of reserves and are not loaned out or invested in bonds.

reserve ratio

_______ are a form of financial instrument by which corportations and governments borrow money from financial investors with promise to repay with interest.

bonds

The market where loans are made to borrowers is called the _____.

Primary loan market

The market in which loans are bought and sold is called the ____.

secondary loan market

In the United States, which institution determines the quantity of money in the economy while considering it to be one of its most important tasks?

The Federal Reserve

Which of the following institutions oversees the safety and stability of the US banking system?

The Federal Reserve

Which of the following is a traditional tool used by the Fed during recessions?

open market operations

What term is used to describe that proportion of deposits banks are legally required to deposit with the central bank?

reserve requirements

What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?

discount rate

If the central bank that wants to increase the quantity of money in the economy will, _____.

buy bonds in open market operations

If the central bank desires to reduce the quantity of money in the economy can _______.

raise the reserve requirement

The quantitative easing policies adopted by the Federal Reserve are generally considered to be ___________.

temporary emergency measures

Which of the following best described an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the 2008-2009 U.S. recession?

Quantitative easing

The central bank requires Southern Bank & Trust to hold 10% of deposits as reserves. Southern Bank & Trust's corporate policy prohibits it from holding excess reserves. Assume the central bank sells $25 million in bonds to Southern Bank & Trust. Given this scenario, which of the following will result?

In the economy, there will be a decrease in the money supply

Atlantic Bank & Trust is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, what would be the corresponding action taken by Atlantic Bank & Trust?

Increasing its reserves

The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then Southern Bank will likely __________________.

borrow for the short term from the central bank

When the central bank decides to increase the discount rate, the _____.

interest rates increase

When the central bank decides it will sell bonds using open market operations _______.

the money supply decreases

________ economists place an emphasis on ______ run economic performance.

Neoclassical; long

The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its _____ and its _______.

potential GDP; natural rate of unemployment

Which of the following is a building block of neoclassical economics?

wages and prices will adjust in a flexible manner

Which of the following government policies would be supported by neoclassical macroeconomic assumptions?

focus on long-term growth and on controlling inflation

Which of the following represents a Keynesian point of view of macroeconomics?

creating increases in aggregate demand to reduce unemployment

Which of the following is a distinguishing characteristic of the neoclassical view?

flexibility of wages and prices over time

A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of : _____.

aggregate demands

In the neoclassical model, economic growth over time shifts potential GDP and the _____ gradually to the right.

vertical AS curve

When the central bank lowers the reserve requirement on deposits ______.

the money supply increases and interest rates decrease

Which of the following events would cause interest rates to increase?

A higher discount rate

When the Federal Reserve announces that it is implementing a new interest rate policy, the _____ will be affected?

federal funds rate

How are the specific interest rates for the lending and borrowing markets determined?

By the forces of supply and demand

When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is ______.

following an expansionary monetary policy

When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following ______.

a contractionary monetary policy

Regardless of the outcome in the long run, _______ always has the effect of stimulating the economy in the short run.

expansionary monetary policy

What is the name given to the equation MV=PQ?

basic quantity equation of money

According to the quantity theory, if constant growth in the money supply is combined with fluctuating velocity, which of the following is most likely to result?

unpredictable rises and falls in nominal GDP

According to the basic quantity equation of money, if price and output fall while velocity increases, then ______.

the quantity of money will fall

If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would be the most popular answer likely be?

fighting inflation

Consumption, investment, government spending, exports, and imports are:

all components of aggregate demand

If markets throughout the global economy all have flexible and continually adjusting prices, then:

each economy will always head for its natural rate of unemployment

Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______ for minimizing their effects these recessions and depressions.

policy prescription

Aggregate demand is more likely ______ than aggregate supply in the short run.

to shift substantially

In the Keynesian framework, ________ will not cause a shift of the Aggregate Supply curve.

changes in output prices

According to the Keynesian framework, _____may cause a recession, but not inflation.

a major trading partners economic slowdown

According to the Keynesian framework, which of the following may help a country reduce inflation, but will not help that country to get out of a recession?

a decrease in the tax rate on consumer income

A key assumption of the Keynesian economic framework is that:

prices and wages are sticky and do not adjust rapidly

According to the ________ argument, a market oriented economy has no obvious way to implement a plan of systematic wage reductions.

coordination

In macroeconomics, what name is given to the costs of changing prices that businesses must consider?

menu costs

According to macroeconomic theory, evidence that high unemployment may be accompanied by low inflation, and low unemployment may be accompanied by high inflation is supported by the:

Keynesian Phillips curve tradeoff

Over the long run, a surge in aggregate demand from a neoclassical perspective will most likely result in:

an increase in price level

If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur?

inflationary increase in price level

If an economy experiences a decrease in aggregate demand due to a decline in consumer confidence and output falls below potential GDP, which of the following is likely to occur?

a rise in unemployment

Suppose that a rise in business confidence has led to more investment in the economy and higher levels of output. In the short run Keynesian analysis, the rise in aggregate demand will:

lower unemployment

From a neoclassical view, which of the following is a true statement?

the economy cannot sustain production above its potential GDP in the long run

Which of the following is a valid criticism of the rational expectations theory?

the assumptions seems too strong

In the neoclassical view, changes in _________ can only have a short run impact on output and on unemployment

aggregate demand

The theory of _____ holds that people will use all information available to them to form the most accurate possible expectations about the future.

rational exceptations

From a neoclassical view, which of the following is less important?

fighting unemployment

The shape of the _____involves a tradeoff between unemployment and inflation.

Phillips curve

Suppose that productivity growth in an economy over a two year period has fallen to less than 2% per year, causing a serve recession. From the neoclassical view, which of the following will be more important in these circumstances?

the growth rate of long term productivity

Using a neoclassical model, what will the level of cyclical unemployment be when an economy is producing a potential GDP?

zero

Referring to a Keynesian Phillips curve, a reduction in inflation is likely to cause:

at least a slight increase in unemployment

A typical Keynesian aggregate supply curve _______ and a typical Keynesian Phillips curve _________.

slopes upward; slope downward

If aggregate supply is vertical, then aggregate demand does not affect:

the quantity of output