Macroeconomics Final Exam R. Ziegler Matching __1. M-1 __2. monetary tools __3. reserve requirement __4. deposit multiplier __5. Fed __6. excess reserves __7. discount rate __8. open market operations __9. rational expectations __10. incomes policies __11. wage and price controls __12. Laffer Curve __13. supply side economics __14. debt __15. deficit __16. crowding out __17. full employment balanced budget __18. structural deficit __19. recessionary gap __20. inflation __21. monetarists __22. equation of exchange __23. crude quantity theory of money __24. Milton Friedman __25. Alan Greenspan __26. real interest rate __27. new classical economics __28. Keynesianism __29. Supply Shock __30. new Keynesians __31. discretionary policy __32. Chicago School __33. Austrian School __34. Phillips Curve Answers to Multiple Choice A.the portion of its deposits which a bank must by law keep and not invest or loan and which must be 'on deposit' at the Fed branch it belongs to. B.the interest rate charged by the Fed for member banks which borrow from it to meet reserve requirement and other needs, and which serves as an index for other interest rates in the country. C.purports to plot the inverse relationship between tax rates and tax revenue collected by government. D.the quasi-public agency which regulates banking and has great control over the money supply and other aspects of the economy. E. attempts to control inflation that set some targets for wages and prices in the economy as a whole, gives particular firms and industries detailed guides for making wage and price decisions, and provides some inducements for firms and unions to follow these guidelines. F. a set of economic theories built on notions that government should be 'rolled back' and not have such a permeating role in our economy, that taxes and other governmental regulation should be reduced, and that there are constructive market supporting measures that should be undertaken rather than public attempts to control market forces. G. the accumulated deficits of the federal government. H. holds that the experience of inflation will cause people to act as if they anticipate it to continue as it has, and that this will also cause their actions to defeat any attempts of government to counteract market forces. I. neo-classical monetarist who has been one of the most influential economic voices of recent times. J. MV = PQ K. actual output is below potential output. L. Fed transactions through private bond dealers to buy and sell government securities. M. holds that a portion of the deficit may be explained by the fact that the economy may be operating at least than it potential output level. N. the measure of money supply usually mentioned, and which is the smallest, most liquid, and most under Fed control. O. an annual shortfall of revenue compared to expenditure of government. P.monetarist, and former associate of objectivist/libertarian Ayn Rand appointed to head the Fed since Reagan, and who is largely responsible for the economic prosperity since the middle 80's. Q. bank holdings over what the Fed requires them to hold, and which amount to lost investment and profit. R. a general rise in the price level. S. represented by such writers as Hayek and von Mises, and which has waged a century long struggle against collectivist economics. T. try to incorporate some of Keynes' ideas with some of the criticisms which have arisen with the failures of his perspective. U. include such things as interest rates, trading of public securities, reserve requirements, money supply, moral suasion, etc. and which are largely the domain of the Federal Reserve Bank. V. publc expenditure which is above receipts and which exists by Congressional creation of programs which cost more than they are funded for; prime examples of this would be Social Security, welfare, medicare and medicare, etc. W. monetarist assessment that an increase in the money supply will lead only to a rise in the price level. X. limits imposed by government on the amount by which wages and prices cna rise in an effort to reduce inflation; most ambitious examples of which have been those during WWI, those of Nixon, and those proposed by Clinton regarding health care; the historical evidence is largely against them working very well. Y. a school of economic thought which dominated the discipline from the thirties into the 1980's and which was based on assumptions that government could close gaps in aggregate demand by spending more. Z. adjusted to reflect inflation. AA. public borrowing precludes some level of credit available to the private sector. BB. that business cycle fluctuations are due largely to changes in the money supply is a basic tenet, but they generally hold market forces to be superior in effect than activist monetary and fiscal and regulatory power. CC. a neo-classical group of economists centered around such economists as Milton Friedman. DD. formulated by policy makers in contrast to rigid rules. EE. plots inflation against unemployment, and originally held that there was an inverse relationship between the two. FF. an unexpected disruption of a major resource which has important impacts on an economy, such as an oil shortage, etc. GG. led by such as Robert Lucas, they argue that government cannot use monetary and fiscal tools to close gaps since people through their rational expectations will frustrate policy initiatives in attempted contravention of market forces. HH. money put in the bank actually 'creates' new wealth due to the reserves system and the velocity of circulation in a way that a Keynesian device purports to measure 31,32,33,34 A 27,28,29,30 B 23,24,25,26 C 19,20,21,22 D