Question

1. When a bank faces a "reserve shortfall"

	a.	It is failing to meet the minimum required reserves mandated by the Federal Reserve and must temporarily halt all operations
	b.	It is failing to meet the minimum required reserves mandated by Congress and must temporarily halt all operations
	c.	It is failing to meet the minimum required reserves mandated by the Federal Reserve and must quickly alter its portfolio of assets to secure these reserves
	d.	It is failing to meet the minimum required reserves mandated by Congress and must quickly alter its portfolio of assets to secure these reserves

2. Given the following consumption function C = $450 + 0.8(Yd), autonomous consumption is equal to _______, while the marginal propensity to consume is equal to ________.   

	a.	0.8Yd; $450
	b.	$450; 0.2
	c.	0.8; $450
	d.	$450;0.8

3. In the context of fiscal stimulus, the recessionary GDP gap is always ______ than the AD _________.

	a.	Smaller; excess
	b.	Smaller; shortfall
	c.	Larger; shortfall
	d.	Larger; Excess

4. Keynes developed two key arguments against Classical economic theory. First, he argued that market-based capitalist economic systems are inherently _________. Second, he argued that movements away from full-employment GDP would __________ by market forces.

	a.	Stable; be automatically fixed
	b.	Stable; grow increasingly large and problematic
	c.	Unstable; be automatically fixed
	d.	Unstable; grow increasingly large and problematic

5. Leakages from the circular flow include:

	a.	Household savings; government spending, investment spending
	b.	Government spending, exports, and investment spending
	c.	Exports, imports, and taxes
	d.	Savings, taxes, and imports

6. The concept of a "cluster of errors" is relevant to which economic school of thought?

	a.	Keynesianism
	b.	Classical
	c.	Marxian
	d.	Austrian

7. M1 and M2 represent

	a.	Two measures of the national debt
	b.	Two monetary policy tools used by the Fed
	c.	Two interest rates influenced by the Fed
	d.	Two measures of the economy’s money stock

8. The Federal Open Market Committee (FOMC):

	a.	Determines the level of government expenditures in the macroeconomy
	b.	Plays a critical role in influencing short-term interest rates and the level of reserves held by private banks
	c.	Dictates what portion of excess reserves private banks must lend out
	d.	Determines what the structural deficit must be each year

Answer 1

When a bank faces a "reserve shortfall"
Ans. c
Banks are required to maintain minimum reserves.

Given the following consumption function C = $450 + 0.8(Yd), autonomous consumption is equal to _______, while the marginal propensity to consume is equal to ________.   
Ans. d
Y-intercept is the autonomous consumption and the slope is the MPC.

M1 and M2 represent

d.Two measures of the economy’s money stock

M1 and M2 are measure of money supply.

Please post remaining questions separately.