the time needed to decide what to do once a macroeconomic problem has been identified, the time needed to introduce a change in monetary or fiscal policy, the time needed for changes in monetary or fiscal policy to affect the economy, people form expectations based on all available information, including likely future actions of goverment policy makers. The offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending. effect that decreases price level has on investment expenditures through the effect that a chance in price level has on interest rates. the dollar amount of reserves a bank is obligated by regulation to hold as cash in the bank's vault or on the account at the Fed, The ratio of reserves to deposits that banks are obligated by regulation to hold. The average tax rate remains constant as GDP rises. The passive approach to resolve a contractionary gap results in a ________ in the price level, and the active approach to resolve a contractionary gap results in an ______ in the price level. An example of government spending as expansionary fiscal policy is the American Recovery and Reinvestment Act of 2009. Are part time workers considered unemployed? We compute the total price of a fixed set ("market basket") of goods and services in a base year, such as 2003, and in a future year, such as 2004. The law of diminishing marginal returns from capital, states that an ______ in capital per worker beyond some level will result in ______ returns of output per worker. a sustained increase in the general (average) price level of goods and services in the economy. The primary currency circulating in the United States consists of: Banks are ________ that link lenders (depositors) to borrowers. Ex) Government spending is a built-in stabilizer, a tax whose average tax rate increases as the taxpayer's income increases and decreases as the tax payer's income decreases. An active policy approach is based on the notion that discretionary fiscal or monetary policy can reduce the costs imposed by an unstable private sector. Labor productivity is ________ divided by the ________. The interest rate expressed in dollars of current value (that is not adjusted for inflation) as a percentage of the amount loaned; the interest rate specified ona loan agreement, The interest rate expressed in dollars of constant purchasing power as a percentage OF THE AMOUNT LOANED; the nominal interest rate minus the inflation rate. Final Exam Review Econ 211: Chapter 30 (Fiscal Policy) study guide by FBEADgcf101 includes 59 questions covering vocabulary, terms and more. Cash holdings by the public, banks keeping excess reserves and a higher required reserve ratio will reduce the amount of new money created by an initial increase in excess reserves. Deliberate measures to decrease government expenditures, increase taxes, or both. The tendency for increases in the price level to lower the real value (or purchasing power) of financial assets with fixed money value and, as a result, to reduce total spending and real output, and conversely for decreases in the price level. collapsing real estate prices and defaults on real estate loans. The problem that arises when policy makers have an incentive to announce one policy to influence expectations, but then pursue different policy once those expectations have been formed and acted on. Based on the CPI, how do we measure annual inflation? funds that banks use to satisfy the cash demands of their customers and the reserve requirements of the Fed. Based on the CPI, how do we measure annual inflation? This explains why unemployment rate in the U.S. in the late 1990's was much higher than in the 1970's. This effort was taken on … refers to the time needed to identify a macroeconomic problem and assess its seriousness. the commitment of central bankers to keep inflation below a certain rate for the next year or two. bank reserves amount to only a fraction of funds on deposit with the bank. ________ inflation occurs when aggregate demand increases, while ________ occurs when aggregate supply decreases. ((The number of unemployed + working-age people seeking work)/(The number of people in the labor force)) x 100. The original equilibrium (E 0) represents a recession, occurring at a quantity of output (Yr) below potential GDP.However, a shift of aggregate demand from AD 0 to AD 1, enacted through an expansionary fiscal policy, can move the economy to a new equilibrium output of E 1 at the level of potential GDP. the purchase of u.s. government bonds by the fed to increase the money supply, and decrease interest rate, the sale of u.s. government bonds by the fed to reduce the money supply, and increase interest rate. What the federal budget would be if the economy were producing at a full-employment level of output. If inflation is much higher than originally anticipated, ________ are made better off and ________ are made worse off. the change in net exports occurs because of changes in real interest rates, which affect exchange rates. the interest rate in the federal funds market; the interest rate banks charge one another for overnight borrowing; the Fed's target interest rate, Simple money multiplier is the reciprocal of the. Fiscal policy used to decrease aggregate demand or supply. ((The number of unemployed + working-age people seeking work)/(The number of people in the labor force)) x 100. Representative money refers to bank notes that exchange for a specific commodity, such as gold.

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