________ policy may be used by government officials to deliberately generate a budget deficit.
Answer(s): A
Discretionary fiscal policy is defined as policymakers instituting deliberate changes in tax laws or spending on government programs that are designed to generate a budget deficit. Deficits emanating from this source are referred to as active budget deficits.
Deposits denominated in U.S. dollars at banks and other financial institutions outside the U.S. are known as ________.
Answer(s): E
Although this name originated because of the large amounts of such deposits held at banks in Western Europe, similar deposits in other parts of the world are also called Eurodollars.
The prevailing budget philosophy prior to Keynes called for a balanced budget. Keynes argued that the government's tax and spending policies should be determined by the
Answer(s): D
Keynesian economists suggest that the government should operate under budget deficits when the economy is in a recession and under a surplus when the economy is growing very quickly. The consequence of this "counter-cyclical" policy will be a stabilization of the economy orchestrated through the government's contribution to aggregate demand. The government should attempt to stabilize the economy through its contribution to aggregate demand.
A reserve requirement of 5 percent implies a potential money deposit multiplier of ________.
The potential money deposit multiplier is the reciprocal (inverse) of the required reserve ratio. Thus, a reserve requirement of .5 implies a potential money deposit multiplier of 1/.5 = 20.
Inflation is problematic for which of the following reasons
Inflation generally implies that all prices, including the price of labor, increase at the same rate.Therefore inflation does not cause a real decline in income. Although nominal interest rates would rise with increased inflation, this does not cause a fundamental economic problem. However, because inflation tends to create long-term uncertainty, many long-term agreements are foregone that would otherwise be beneficial.
Post your Comments and Discuss CFA CFA I exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the CFA I content, but please register or login to continue.