Macro Final - Multiple Choice: Each of the following...

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Multiple Choice: Each of the following questions or incomplete statements is followed by a series of suggested answers or completions. Select the one best response for each question. (1 point each) [This exam has 100 maximum possible points. 35 of these points come from the multiple choice questions and 65 of these points come from the essay questions.] 1. Which of the following would most likely result if the federal government decreased its spending without changing tax revenues during a period of full employment? A. a recession B. higher inflation C. higher interest rates D. There will be no change in the macroeconomic equilibrium. 2. If the economy is operating at full employment and there is no inflation and suddenly leakages (personal saving + taxes + imports) become greater than injections (planned Ig + government spending + exports) the government should A. decrease personal income taxes. B. decrease its spending for goods and services. C. pass legislation to decrease social security benefits. D. increase taxes to the business sector. 3. The built-in stabilizers automatically A. balance the government's budget over the course of the business cycle. B. tend to produce a deficit in the government's budget during a period of inflation. C. tend to produce a surplus in the government's budget during a period of inflation. D. tend to produce a surplus in the government's budget during a period of recession. 4. The maximum amount that an individual commercial bank can safely lend is A. an amount equal to its excess reserves. B. an amount equal to some multiple of its excess reserves. C. an amount equal to one half of its excess reserves. D. an amount equal to its actual reserves. 5. A large federal/public debt imposes a burden on future generations if it A. is used to eliminate a current recession. B. reduces the current level of investment and, thus, capital accumulation. C. reduces current interest rates and, thus, increases current investment. D. increases the current level of technology. 6. Monetary policy is often ineffective when used to eliminate a recession because at such times A. banks lack the reserves to make loans. B. there may not be a strong demand for loans . C. the Fed cannot engage in open market operations. D. the public may suddenly convert near-money into money. 7. If rapid inflation occurs in an economy that is operating near full employment, the monetary and fiscal policies that should be used include
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A. a government deficit, the sale of securities in the open market, and a higher discount rate. B. a government deficit, the purchase of securities in the open market, and a higher discount rate. C. a government surplus, the sale of securities in the open market, and a higher discount
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Macro Final - Multiple Choice: Each of the following...

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