Quizific | Aggregate Demand Curve Quiz

The finance of government spending through a Treasury sale of bonds which are then purchased by the Fed

causes both reserves and the monetary base to rise.

causes both reserves and the monetary base to decline.

causes reserves to rise, but the monetary base to decline.

has no net effect on the monetary base.

This method of financing government spending is frequently called printing money because high-powered money (the monetary base) is created in the process.

Financing government spending with taxes

The finance of government spending through a Treasury sale of bonds that are then purchased by the Fed

Financing government spending by selling bonds to the public, which pays for the bonds with currency

Financing government spending by selling bonds to the public, which pays for the bonds with checks

Only when budget deficits are financed by money creation does the increased government spending lead to a(n) _ in the _.

decrease; monetary base

increase; monetary base

decrease; money multiplier

increase; money multiplier

A government budget deficit can only lead to an expansion of the monetary base if

the Fed allows this to happen by willingly selling bonds.

the Fed allows this to happen by willingly purchasing bonds.

the economy is operating at full employment.

both (a) and (c) occur.

If the deficit is financed by selling bonds to the _, the money supply will _, shifting the aggregate demand curve to the right, and leading to a rise in the price level.

public; rise

public; fall

central bank; rise

central bank; fall

If the deficit is financed by selling bonds to the ___, the money supply will _, shifting the aggregate demand curve to the ___.

public; rise; right

public; fall; left

central bank; rise; right

central bank; fall; left

If the deficit is financed by selling bonds to

the central bank, the money supply will rise, shifting the aggregate demand curve to the right,and leading to a rise in the price level.

the public, the money supply will rise, shifting the aggregate demand curve to the right, andleading to a rise in the price level.

either the public or to the central bank, the money supply will rise, shifting the aggregatedemand curve to the right, and leading to a rise in the price level.

either the government or to the central bank, the money supply will rise, shifting the aggregatedemand curve to the right, and leading to a rise in the price level.

Persistent budget deficits will be inflationary if

they are financed by Treasury sales of bonds to the public.

they are financed by Treasury sales of bonds to the Fed.

they are financed by Treasury sales of bonds to commercial banks.

any of the above occurs.

Financing a deficit by money creation will lead to a sustained inflation if the deficit

fails to exceed the Gramm-Rudman-Hollings ceiling.

is persistent.

is temporary.

is none of the above.

For budget deficits to be inflationary, they must be

persistent.

financed by the creation of high-powered money.

financed by issuing bonds.

both (a) and (b) of the above.

Aggregate Demand Curve Quiz