Fiscal Policy Deficits Debt
A major advantage of the _____ or _____ stabilizers is that they require no legislative action by Congress to be made effective.
built-in automatic
The paper money, or currency, in the United States essentially represents
a debt of the Federal Reserve System.
The goldsmith's ability to create money was based on the fact that paper money in the form of gold receipts was
rarely redeemed for gold.
The asset demand for money is most closely related to money functioning as a
store of value
What concept describes how quickly an investment increases in value when interest is paid not only on the original amount invested, but also on the accumulated interest payments?
Compound Interest
The __________ budget tells us what the size of the federal budget deficit or surplus would be if the economy was at full employment
cyclically adjusted
If a firm possesses assets whose value exceeds the value of its debts, the firm is said to be
solvent
In a __________ banking system, banks can create money through the lending process.
fractional reserve
If the quantity of money demanded exceeds the quantity supplied, the interest rate will
rise.
The_________of an asset should exactly equal the total present value of all of the asset's future payments
price
The federal budget deficit is found by
subtracting government tax revenues from government spending in a particular year.
Currency and checkable deposits are the major components of
money supply M1.
The greater the leverage in the financial system, all else equal, the greater the_________of the financial system
instability
The securities held as assets by the Federal Reserve Banks consist mainly of
Treasury bills, Treasury notes, and Treasury bonds.
Index funds are a portfolio of
stocks or bonds that exactly match a particular index.
The ________ of expansionary fiscal policy suggests that increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.
crowding-out effect
The government bailout of large institutions creates the problem of moral hazard, which means that these large firms will
have an incentive to make highly risky investments.
A bank is in the position to make loans when required reserves
are less than actual reserves.
The Federal Reserve Banks sell government securities to the public. As a result, the checkable deposits and reserves of commercial banks both
decrease.
The buying and selling process that leads profit-seeking investors to equalize average expected rates of return from identical assets is known as
arbitrage
One timing problem in using fiscal policy to counter a recession is the "recognition lag" that occurs between the
start of the recession and the time it takes to recognize that the recession has started.
One reason that near monies are important is because
they can be easily converted into money or vice versa, and thereby can influence the stability of the economy.
Other things being equal, an expansion of commercial bank lending
increases the money supply.
The Federal Reserve does not set the federal funds rate, but historically has influenced it using
its open-market operations.
One statistic that quantifies the risk of an investment is
beta