ECO372 Principles of Macroeconomics
University of Phoenix
ECO372T
Week 1 Apply -Output, Income, and Economic Growth SCORE 98 PERCENT
Question 1
he equation
for net investment is written as:
multiple
choice
Net Investment = Gross Investment – Depreciation
Net Investment = Nominal GDP – Gross Investment
Net Investment = Consumption – Gross Investment
Net Investment = Depreciation – Gross Investment
Question 2
The major
difference between nominal GDP and real GDP is:
multiple
choice
nominal GDP measures the value of output with constant output levels, while
real GDP measures output using current-year output levels.
nominal GDP measures the value of output in constant prices, while real GDP
measures output using current-year prices.
nominal GDP measures the value of output with current-year output levels, while
real GDP measures output using constant output levels.
nominal GDP measures the value of output in current-year prices, while real GDP
measures output using constant prices.
Question 3
Which of
the following correctly describes GDP using the income approach?
multiple
choice
GDP = Wages + Rents + Interest + Profits and Losses
GDP = National Income + Indirect Business Taxes + Depreciation + Net Foreign
Factor Income
GDP = Wages + Rents + Interest + Profits and Losses + National Income
GDP = Consumption + Gross Investment + Net Exports + Government Purchases
Question 4
Which of
the following scenarios would be included in GDP?
Multiple
choice
Darius unclogs the drain in his sink using the plunger he owns.
Pam buys a new 40-inch television at Walmart.
Sandra is a waitress at Morton’s Steakhouse. She receives a cash tip of $50
that she pockets and does not report.
Miguel won $100 in his office fantasy football league.
Question 5
Determine
whether each of the following examples would be included in Gross Domestic
Product (GDP).
a.
When Judy went to the grocery store yesterday, she bought three pounds of
potatoes.
Judy's purchase of potatoes would be included in GDP as a consumption
expenditure.
b. Ford
Motor Company buys four tires to put on a new Ford Mustang.
The purchase of the tires would not be included in GDP.
c. The
U.S. Air Force purchases two new fighter jets from Boeing.
The purchase of the two fighter jets would be included in GDP as a government
purchase.
d. When
Joey had his birthday last week, his grandmother sent him a $100 bill that he
could spend.
Joey's birthday gift of $100 would not be included in GDP
Question 6
Real GDP
refers to _____.
Multiple
Choice
GDP data that embodies changes in the price level but not changes in physical
output
the value of the domestic output after adjustments have been made for
environmental pollution and changes in the distribution of income
GDP data that does not reflect changes in both physical output and the price
level
GDP data that has been adjusted for changes in the price level
Question 7
The gross
domestic product (GDP) concept accounts for society's valuation of the relative
worth of goods and services by using a _____.
Multiple
Choice
measure of volume
utility measure
measure of physical weight
monetary measure
Question 8
“Net
foreign factor income” in the national income accounts refers to the difference
between the _____.
Multiple
Choice
value of products sold by Americans to other nations and the value of products
bought by Americans from other nations.
income Americans gain from supplying resources abroad and the income that
foreigners earn by supplying resources in the U.S.
income earned by Americans in the U.S. minus the income earned by foreigners in
the U.S.
value of investments that Americans made abroad and the value of investments
made by foreigners in the U.S.
Question 9
Personal
consumption expenditures consist of _____.
Multiple
Choice
domestic investments
foreign investments in the United States
foreign plus domestic investments
household and individual purchases of services and durable and nondurable goods
Question
10
A
distinguishing characteristic of public transfer payments is that they _____.
Multiple
Choice
include wages to government workers
are counted as part of government purchases in the calculation of the gross
domestic product
involve no contribution to current production in return for the payment
include the cost of maintaining public parks
Question
11
Answer the
next question based on the following price and output data over a five-year
period for an economy that produces only one good. Assume that year 2 is the
base year.
|
Year |
Units of Output |
Price per Unit |
|
1 |
8 |
$2 |
|
2 |
10 |
3 |
|
3 |
15 |
4 |
|
4 |
18 |
5 |
|
5 |
20 |
6 |
In year 4,
nominal GDP would be _____.
Multiple
Choice
$316
$60
$120
$90
Question
12
GDP
excludes most nonmarket transactions. Therefore, GDP tends to _____.
Multiple
Choice
underestimate the rate of inflation in the economy
overestimate the rate of inflation in the economy
underestimate the amount of production in the economy
overestimate the amount of production of the economy
Question
13
In the
treatment of U.S. exports and imports, national income accountants _____.
Multiple
Choice
subtract exports but add imports in calculating GDP
add both exports and imports in calculating GDP
subtract both exports and imports in calculating GDP
add exports but subtract imports in calculating GDP
Question
14
GDP
measured using base year prices is called _____.
Multiple
Choice
nominal GDP
constant GDP
real GDP
deflated GDP
Question
15
Which of
the following is not an example of an intermediate good?
Multiple
Choice
gasoline bought by a trucking company
an oven bought by a homeowner
flour bought by a bakery
office supplies bought by an accounting firm
Question
16
Suppose
that real GDP per capita in the United States is $49,000. If the long-term
growth rate of real GDP per capita is 1.6% per year, how many years will it
take for real GDP per capita to reach $98,000?
Instructions:
Enter your answer as a whole number.
44 Numeric
Response Edit Unavailable. 45. Years
Question
17
Suppose that Italy can produce either goods or services with its
resources, and that its PPF curve is shown on the graph as PPF1.
Using the graph, for each of the following situations, determine whether
the PPF curve shifts.
a. Suppose that Italy increases its spending on education, which
increases the amount of human capital in Italy.
Italy's PPF curve would increase and move to
PPF3.
b. A recession causes Italy's unemployment rate to increase above the
natural rate of unemployment.
Italy's PPF curve would remain the same at
PPF1.
c. Italy experiences an influx of immigrants from surrounding countries,
which causes the population of Italy to increase.
Italy's PPF curve would increase and move to
PPF3.
Question 18
The table
below shows real GDP per capita for the United States between the years
1950–2016.
Real GDP per Capita over Time
|
Year |
Real GDP per Capita (dollars) |
|
1950 |
$13,819 |
|
1975 |
24,601 |
|
2000 |
43,935 |
|
2016 |
52,172 |
Instructions:
Round your answers to one decimal place.
a. What is the growth rate in the standard of living from 1950 to 1975?
3.1 Numeric Response 1. Edit
Unavailable. 3.1 incorrect. %
b. What is the growth rate in the standard of living from 1975 to 2000?
3.1 Numeric Response 2. Edit Unavailable.
3.1 incorrect. %
c. What is the growth rate in the standard of living from 2000 to 2016?
1.2 Numeric Response 3. Edit Unavailable.
1.2 incorrect. %
ANSWER
Correct answers should be:
78.0%
78.6%
18.7%
Question 19
Providing a constant number of workers with additional capital with
which to work will ______ labor productivity at a(n) ______ rate.
Multiple Choice
increase; constant
decrease; decreasing
increase; increasing
increase; decreasing
Question 20
Use the following diagram to answer the next question.
The most likely cause for a shift in the production possibilities
frontier from AB to CD is
Multiple Choice
an increase in government purchase of the economy's
output.
the use of the economy's resources in a less
efficient way.
an increase in the quantity and quality of labor
resources.
an increase in the spending of business and
consumers.
Question 21
The application of new technologies to the production process will
increase
Multiple Choice
labor productivity.
the quantity of human capital.
the unemployment rate.
the share of the population employed.
Question 22
The key variable in determining changes in a country’s standard of
living is the
Multiple Choice
interest rate.
long-run rate of economic growth.
unemployment rate.
inflation rate.
Question 23
Given the annual rate of economic growth, the “rule of 72” allows one to
Multiple Choice
determine the accompanying rate of inflation.
calculate the size of the GDP gap.
determine the growth rate of per capita GDP.
calculate the number of years required for real GDP
to double.
Question 24
Before the Industrial Revolution, living standards in the world
Multiple Choice
were relatively stagnant for long periods of time.
were already rising significantly for many decades.
were declining because of rapid increases in
population.
are not known, for lack of reliable records from that
period.
Question 25
the two countries are the same. According to the principle of
diminishing returns to capital, an additional unit of capital will ______ in
Alpha compared to Beta, holding other factors constant.
Multiple Choice
increase output by the same amount
have no effect on output
increase output less
increase output more
Question 26
When a firm builds a new factory, this is an example of an investment in
Multiple Choice
the market.
human capital.
physical capital.
research and development.
Question 27
Increasing the capital available to the workforce, holding other factors
constant, tends to ______ total output while ______ labor productivity.
Multiple Choice
increase; decreasing
increase; not changing
increase; increasing
decrease; increasing
Question 28
To increase future living standards by pursuing higher current rates of
investment spending, an economy must
Multiple Choice
reduce current rates of consumption spending.
allow higher rates of current
consumption.
reduce the current capital stock.
decrease the amount of future research and
development spending.
Question 29
Between the U.S. and Nepal, Nepal invests less in new factories and
equipment. This will likely cause
Multiple Choice
the U.S.'s production possibilities frontier to shift
inward faster than Nepal's.
Nepal's production possibilities frontier to shift outward
faster than the U.S.'s.
Nepal's production possibilities frontier to shift
inward faster than the U.S.'s.
the U.S.'s production possibilities frontier to shift
outward faster than Nepal's.
Question 30
Which of the following will not increase a nation’s real GDP?
Multiple Choice
number of workers
average price level
technological progress
labor productivity
Compare and contrast the phases
of the business cycle.
ECO372T
Week 2 Apply Business Cycles, Unemployment, and Inflation SCORE
100 PERCENT
Question 1
Using the graph below, identify the different stages of the business
cycle. Assume that A, B, and C represent consecutive years.
a. A time
period when the economy is growing toward full employment is known as an
expansion.
It is depicted in the graph as B through C .
b. A time
period characterized by full or near-full employment is known as a peak
It is depicted in the graph as A.
c. A time
period with two consecutive quarters of declining output is known as a
recession .
It is depicted in the graph as A through B
d. A time
period when employment and real output are at their lowest levels is known as a
trough
It is depicted in the graph as B
Question 2
Suppose
Marcus eats nothing but burritos for dinner. He buys 30 burritos each month.
During the last couple of weeks, Marcus noticed an increase in the price of
burritos. The price of burritos rose from $5.50 per burrito last month to $6.60
per burrito this month. Assume that Marcus has a fixed income of $165 that he
can spend on burritos.
How
many burritos can Marcus afford to buy at the new price of $6.60?
25
burritos
Question 3
In each of
the following examples, identify whether the person is counted in the official
labor force or not.
a. Cynthia owns and operates her own retail store.
In the labor force
b. Elder has recently moved to a retirement community in Florida where he
enjoys his “golden years” as a retiree.
Not in the labor force
c. Drew lost his job at the bank last year. He spent 6 months applying for
every job possible before giving up 2 months ago.
Not in the labor force
d. Katherine works part-time at a small retail store. She would like to work
full-time, but her employer is unable to extend her hours.
In the labor force
e. Latisha is an ambitious 15-year-old who spends her summer working as a
lifeguard at a local pool.
Not in the labor force
f. Bill is currently serving a prison sentence, and works making license
plates.
Not in the labor force
g. Tyrell just graduated college with a business degree. He is currently
looking for a banking job in the major city he just moved to.
In the labor force
Question 4
For each
of the following items, indicate to which major group of the CPI the item
belongs:
a. Tuition payments to your university: Education and communication Correct
b. A new desk for your dorm room or apartment: Housing
c. An airline ticket to Florida to be used during spring break: Transportation
d. A 12-pack of beer to be used during spring break: Food and beverages
e. Tickets to a local concert: Recreation
f. A late night visit to the emergency room: Medical
Question 5
In the United
States, business cycles have occurred against a backdrop of a long-run trend of
Multiple
Choice
rising inflation.
rising real GDP.
stagnant productivity growth.
declining unemployment.
Question 6
Use the
table below to answer the next question.
|
Year |
Employed |
Structural |
Frictional |
Cyclical |
Unemployed |
|
2003 |
1,800 |
50 |
100 |
50 |
200 |
|
2004 |
2,400 |
100 |
100 |
|
300 |
|
2005 |
2,000 |
|
150 |
180 |
500 |
|
2006 |
2,660 |
40 |
|
0 |
140 |
Determine
the number of people frictionally unemployed for the year 2006.
Multiple
Choice
0
100
-100
200
Question 7
The
unemployed are those people who
Multiple
Choice
are not employed but are seeking work.
are not working.
do not have jobs.
are not in the workforce.
Question 8
A trough
in the business cycle occurs when
Multiple
Choice
cyclical unemployment is at a minimum point.
employment and output reach their lowest levels.
the inflation rate is at its lowest level.
the natural rate of unemployment is at a minimum point.
Question 9
The
unemployment rate of full-employment is also called the
Multiple
Choice
frictional rate of unemployment.
potential rate of unemployment.
natural rate of unemployment.
cyclical rate of unemployment.
Question
10
The rate
of unemployment when the economy is fully employed is called the
Multiple
Choice
full-employment rate of unemployment.
natural rate of unemployment.
frictional rate of unemployment.
structural rate of unemployment.
Question
11
The labor
force includes
Multiple
Choice
employed workers and persons who are officially unemployed.
full-time workers but excludes part-time workers.
permanent employees but excludes temporary employees.
employed workers but excludes persons who are officially unemployed.
Question
12
Use the
table below to answer the next question.
|
Year |
Employed |
Structural |
Frictional |
Cyclical |
Unemployed |
|
2003 |
1,800 |
50 |
100 |
50 |
200 |
|
2004 |
2,400 |
100 |
100 |
|
300 |
|
2005 |
2,000 |
|
150 |
180 |
500 |
|
2006 |
2,660 |
40 |
|
0 |
140 |
Determine
the number of people cyclically unemployed for the year 2004.
Multiple
Choice
100
200
-100
0
Question
13
According
to the Bureau of Labor Statistics, to be officially unemployed a person must
Multiple
Choice
be in the labor force.
be 21 years of age or older.
have lost a job.
be waiting to be called back from a layoff.
Question
14
Use the
following diagram to answer the next question.
The
straight line E drawn through the wavy lines would provide an estimate of the
Multiple
Choice
natural rate of unemployment.
economic growth trend.
recovery trend.
recession fluctuation.
Question
15
In
calculating the unemployment rate, part-time workers are
Multiple
Choice
used to determine the size of the labor force, but not the unemployment rate.
counted as unemployed because they are not working full-time.
counted as employed because they are receiving payment for work.
treated the same as “discouraged” workers who are not actively seeking
employment.
Question
16
Search and
wait unemployment is another way to describe
Multiple
Choice
frictional unemployment.
structural unemployment.
cyclical unemployment.
noncyclical unemployment.
Question
17
Use the
table below to answer the next question.
|
Year |
Employed |
Structural |
Frictional |
Cyclical |
Unemployed |
|
2003 |
1,800 |
50 |
100 |
50 |
200 |
|
2004 |
2,400 |
100 |
100 |
|
300 |
|
2005 |
2,000 |
|
150 |
180 |
500 |
|
2006 |
2,660 |
40 |
|
0 |
140 |
Determine
the number of people structurally unemployed for the year 2005.
Multiple
Choice
150
0
220
170
Question
18
The GDP
gap measures the amount by which
Multiple
Choice
potential GDP differs from actual GDP.
actual GDP exceeds equilibrium GDP.
nominal GDP exceeds real GDP.
actual GDP exceeds national income.
Question
19
The
unemployment rate is interpreted as the percentage of the
Multiple
Choice
adult population who are unemployed.
workforce that have been laid off.
able-bodied population who are not working.
labor force that are not employed.
Question
20
Which of
the following statements is true about causes of business cycle fluctuations?
Multiple
Choice
Economists all agree that productivity shocks are the cause of most business
cycle changes.
There are a wide range of theories as to the underlying causes of business
cycle movements.
Economists all agree that monetary changes are primarily responsible for
business cycle fluctuations.
Economists all agree that supply shocks are the cause of most business cycle
fluctuations.
Question
21
What is an
advantage of mild inflation according to some economists?
Multiple
Choice
It helps to close the GDP gap.
It reduces frictional, structural, and cyclical unemployment in the economy to
make the economy more productive.
It reduces the inflation premium.
It makes it easier for firms to adjust real wages downward as demand for their
products falls.
Question
22
In an
economy, the total expenditures for a market basket of goods in year 1 (the
base year) was $5,000 billion. In year 2, the total expenditure for the same
market basket of goods was $5,500 billion. What was the Consumer Price Index
for the economy in year 2?
Multiple
Choice
110
100
120
115
Question
23
Assume
that there is a fixed rate of interest on contracts for borrowers and lenders.
If unexpected inflation occurs in the economy, then
Multiple
Choice
both lenders and borrowers benefit.
borrowers are hurt, but lenders benefit.
lenders are hurt, but borrowers benefit.
both lenders and borrowers are hurt.
Question
24
Inflation
is a rise in
Multiple
Choice
the standard of living over time.
real GDP over time.
unemployment over time.
the general level of prices over time.
Question
25
Inflation
that occurs when total spending is greater than the economy's ability to
produce output at the existing price level is
Multiple
Choice
unexpected inflation.
cost-push inflation.
demand-pull inflation.
expected inflation.
Question
26
Which of
the following measures the changes in the prices of a “market basket” of some
300 goods and services purchased by typical urban consumers?
Multiple
Choice
the Retail Trade survey
the GDP Price Index
the Wholesale Price Index
the
Consumer Price Index
Question
27
The CPI
compiled by the Bureau of Labor Statistics is used in the computations for the
Multiple
Choice
inflation rate.
interest rate.
unemployment rate.
foreign exchange rate.
Question
28
Inflation
caused by a rise in the prices of inputs is referred to as
Multiple
Choice
hyperinflation.
cost-push inflation.
unexpected inflation.
demand-pull inflation.
Question
29
What is
the main problem with mild inflation according to some economists?
Multiple
Choice
It diverts productive time towards activities to hedge against inflation.
It leads to unexpected deflation.
It reduces the size of the GDP gap.
It increases frictional and structural unemployment in the economy.
Question
30
Core
inflation refers to the inflation picture after stripping away the
Multiple
Choice
service-sector prices.
food and energy prices.
government-regulated prices.
capital goods prices.
ECO372 Wk
3 Discussion – Government Revenue and Expenditures
Identify the main sources of revenue for and the largest expenditures made
by federal, state, and local governments.
ECO372T
Week 3 Apply Public Finance and Aggregate Demand and Supply Homework
Question 1
Which of
the following transactions best represents the government making a transfer
payment to a household or business?
multiple
choice
The federal government’s Supplemental Nutritional Assistance Program assists
low-income families with purchasing food.
The federal government’s Internal Revenue Service hires extra accountants
during the tax season to audit tax returns.
The state government’s Office of Motor Vehicles imposes an annual licensing fee
for all in-state vehicles.
The local government’s Department of Parks and Recreation operates a local pool
for residents in the summer.
Question 2
Which of
the following descriptions is most representative of the mix of revenues and
expenditures of the federal government?
multiple
choice
Revenue is predominantly from property taxes but may include sales taxes or
income taxes. Expenditures include investments in education and public welfare.
Revenue is predominantly from sales taxes and may include personal or corporate
income taxes. Expenditures include investments in education and infrastructure.
Revenue is predominantly from income taxes and payroll taxes. Expenditures
include income security and interest on the national debt.
Revenue is predominantly from excise taxes and property taxes. Expenditures
include investments in infrastructure and national defense.
Question 3
How is the
public debt calculated?
rev:
06_21_2018
Multiple
Choice
By subtracting current government spending from current government tax revenues
By summing the annual government purchases over time
By subtracting the government’s total liabilities from its total assets
By summing the annual difference between tax revenues and government spending
over the years
Question 4
Which of
the following is not a significant source of revenue for the U.S. federal
government?
Multiple
Choice
Personal income taxes
Corporate income taxes
Property taxes
Payroll taxes
Question 5
Which one
of the following is not an excise tax of the federal government?
Multiple
Choice
Gasoline tax
General sales tax
Correct
Alcoholic beverage tax
Tobacco tax
Question 6
A federal
budget deficit exists when federal government
Multiple
Choice
taxation is decreasing in a given year.
spending is increasing in a given year.
assets are less than liabilities in a given year.
spending exceeds tax revenues in a given year.
Question 7
Which of
the following is the largest expenditure item of local governments?
Multiple
Choice
Highways
Public safety
Welfare
Education
Question 8
A tax is
regressive if it
Multiple
Choice
takes a higher percentage of income as income increases.
takes the same percentage of income regardless of income level.
is levied on consumers.
takes a smaller percentage of income as income increases.
Question 9
Many
states in the U.S. acquire significant amounts of funds from the following,
except
Multiple
Choice
property taxes.
state-run lotteries.
personal income taxes.
grants from the Federal government.
Question
10
One
important reason why the United States government is not likely to go bankrupt
even with a large public debt is that it has
Multiple
Choice
the power to print money to finance the debt.
a strong military to protect it from creditors.
the capacity to pay off its outstanding debt with gold.
the ability to decrease interest rates and increase investment spending.
Question
11
The
circular flow model with government included would show that government
Multiple
Choice
obtains revenues in the product market and uses it to cover costs in the
resource market.
produces goods and services and sells them in the product market to generate
net taxes.
controls economic resources and sells them in the resource market.
provides goods and services to businesses and households and pays for them with
net taxes.
Question
12
A public
debt that is owed to foreigners can be burdensome because
Multiple
Choice
the payment of interest will conflict with a nation's foreign aid programs.
the payment of interest reduces the volume of goods and services available for
domestic uses.
the payment of interest will necessarily have a deflationary effect on prices
in the paying nation.
foreign interest rates are persistently higher than domestic interest rates.
Question
13
Which of
the following is not a government activity that is involved in public finance?
Multiple
Choice
Running government-owned enterprises such as hospitals, utilities, and
lotteries.
Regulating the activities of firms in the financial sector of the economy.
Providing public goods and services such as national defense and education.
Redistributing income through various taxes and income-transfer payments.
Question
14
The Social
Security tax is regressive because
Multiple
Choice
the Social Security tax rate applied does not rise with the salary level.
each individual must pay a set percentage of his or her income in Social Security
taxes.
as income increases, the Social Security tax rate increases at a decreasing
rate.
no Social Security tax is collected for incomes in excess of a “cap” income
level.
Question
15
Which of
the following is the largest expenditure item of state governments?
Multiple
Choice
Public welfare
Highways
Education
Health and hospitals
Question
16
Aggregate
demand is best described as the relationship between the:
multiple
choice
quantity demanded of a good or service and the price of the good or service.
quantity demanded in a market and the market price.
quantity of real GDP demanded in the economy and the price level.
quantity demanded and the price.
Question
17
For each
of the following scenarios, determine the effect on aggregate supply.
a. There
is an unexpected decrease in oil prices. This causes:
multiple
choice 1
a movement along the aggregate supply curve to the right, indicating an
increase in the quantity of real GDP supplied.
a movement along the aggregate supply curve to the left, indicating a decrease
in the quantity of real GDP supplied.
an increase in aggregate supply, shifting the aggregate supply curve to the
right.
a decrease in aggregate supply, shifting the aggregate supply curve to the
left.
b. The
government increases the amount that all producers are required to contribute
to health insurance coverage. This causes:
multiple
choice 2
a movement along the aggregate supply curve to the right, indicating an
increase in the quantity of real GDP supplied.
a movement along the aggregate supply curve to the left, indicating a decrease
in the quantity of real GDP supplied.
a decrease in aggregate supply, shifting the aggregate supply curve to the
left.
an increase in aggregate supply, shifting the aggregate supply curve to the
right.
Question
18
Determine
the effect on aggregate demand for each of the scenarios described below.
a. All
European countries experience an economic expansion, raising incomes in each of
the European countries. This causes:
multiple
choice 1
an increase in aggregate demand, shifting the aggregate demand curve to the
right.
a decrease in aggregate demand, shifting the aggregate demand curve to the
left.
a movement along the aggregate demand curve to the left, indicating a decrease
in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the right, indicating an
increase in the quantity of real GDP demanded.
b. The
government decides to decrease the amount it spends on the military. This
causes:
multiple
choice 2
a decrease in aggregate demand, shifting the aggregate demand curve to the
left.
an increase in aggregate demand, shifting the aggregate demand curve to the
right.
a movement along the aggregate demand curve to the right, indicating an
increase in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the left, indicating a decrease in
the quantity of real GDP demanded.
Question
19
The
long-run aggregate supply curve is vertical because:
multiple
choice
firms cannot change prices or input prices in the long run.
some input prices are sticky in the long run.
all input prices are flexible in the long run.
all input prices are sticky in the long run.
Question
20
For each
of the examples below, determine the effect on aggregate demand.
a. In
order to reduce the deficit, the government decides to increase the level of
taxes in the economy. This causes:
multiple
choice 1
an increase in aggregate demand, shifting the aggregate demand curve to the
right.
a movement along the aggregate demand curve to the right, indicating an
increase in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the left, indicating a decrease
in the quantity of real GDP demanded.
a decrease in aggregate demand, shifting the aggregate demand curve to the
left.
b. The
economy experiences a sustained expansion in stock prices for the majority of
companies in the country. This causes:
multiple
choice 2
a movement along the aggregate demand curve to the left, indicating a decrease
in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the right, indicating an
increase in the quantity of real GDP demanded.
a decrease in aggregate demand, shifting the aggregate demand curve to the
left.
an increase in aggregate demand, shifting the aggregate demand curve to the
right.
Question
21
Which
would most likely shift the aggregate supply curve? A change in the prices of
_____.
Multiple
Choice
foreign products
domestic products
financial assets
resources
Question
22
Use the
following graph to answer the next question.
When
output increases from Q1 and the price level decreases from P1, this change
will _____.
Multiple
Choice
be caused by a shift in the aggregate supply curve from AS1 to AS3
result in a movement along the aggregate demand curve from e1 to e2
result in a movement along the aggregate demand curve from e3 to e1
be caused by a shift in the aggregate supply curve from AS1 to AS2
Question
23
In the
aggregate demand-aggregate supply model, the economy’s price level is assumed
to be _____.
Multiple
Choice
variable, unlike in the aggregate expenditures model
constant, just like in the aggregate expenditures model
variable, just like in the aggregate expenditures model
constant, unlike in the aggregate expenditures model
Question
24
The
aggregate demand curve or schedule shows the relationship between the total
demand for output and the _____.
Multiple
Choice
price level
income level
real GDP
interest rate
Question
25
An
increase in aggregate demand is most likely to be caused by a(n) _____.
Multiple
Choice
decrease in government spending
decrease in the tax rates on household income
decrease in expected returns on investment
increase in real interest rates
Question
26
An
increase in personal income taxes will cause a(n) _____.
Multiple
Choice
increase (or shift right) in aggregate demand
decrease (or shift left) in aggregate demand
increase in the quantity of real output demanded (or movement down along AD)
decrease in the quantity of real output demanded (or movement up along AD)
Question
27
Which of
the following events would most likely reduce aggregate demand?
Multiple
Choice
A reduction in the amount of existing capital stock.
An increase in real interest rates.
A reduction in business and personal tax rates.
An increase in expected returns on investment.
Question
28
Which
would most likely increase aggregate supply?
Multiple
Choice
An increase in productivity
A decrease in personal income taxes
A decrease in business subsidies
An increase in the prices of imported products
Question
29
Use the
following table which shows the aggregate demand and aggregate supply schedules
for a hypothetical economy to answer the next question.
Real
Domestic Output Demanded (in billions) Price Level
(index value)
Real Domestic Output Supplied (in billions)
$3,000 350
$9,000
4,000
300 8,000
5,000
250 7,000
6,000
200 6,000
7,000
150 5,000
8,000
100 4,000
The
equilibrium price and output levels will be _____.
Multiple
Choice
250 and $7,000
200 and $5,000
300 and $8,000
200 and $6,000
Question
30
The
long-run aggregate supply curve is _____.
Multiple
Choice
upward-sloping and becomes flatter at output levels above the full-employment
output
upward-sloping and becomes steeper at output levels above the full-employment
output
horizontal
vertical
Explain what happens to the
interest rate if the money supply increases or decreases and the money demand
remains unchanged. Explain what happens to the interest rate if the money
demand increases or decreases and the money supply remains unchanged.
ECO372T
Week 4 Apply Money and the Federal Reserve SCORE 100 PERCENT
Question 1
Suppose
the Federal Reserve increases the amount of reserves by $100 million and the
total money supply increases by $500 million.
Instructions:
Enter your answers as a whole number.
a. What is
the money multiplier?
5
b. Using
the money multiplier from part a, how much will the money supply change if the
Federal Reserve increases reserves by $50 million?
$ 250 Million
Question 2
Use the
following table to determine the levels of M1 and M2 in the United States.
Money
Categories in the United States
|
Asset |
Amount (billions of dollars) |
|
Currency |
$82 |
|
Demand deposits |
80 |
|
Money market funds |
44 |
|
Other checkable deposits |
37 |
|
Savings deposits |
460 |
|
Small time deposits |
22 |
|
Traveler's checks |
4 |
Instructions:
Enter your answers as a whole number.
a. Calculate the M1 money supply.
$ 203 billion
b. Calculate the M2 money supply.
$ 729 billion
Question 3
The part
of the Federal Reserve that determines and implements the nation's monetary
policy and controls the money supply to promote stable prices and economic
growth is the:
multiple
choice
12 Federal Reserve District Banks.
president of the Board of Governors.
Board of Governors.
Federal Open Market Committee.
Question 4
For each
of the following scenarios, determine whether money is being used as a medium
of account, store of value, or unit of account.
a.
Sam gives the grocery store clerk a $5 bill to pay for his purchase.
multiple
choice 1
Medium of exchange
Store of value
Unit of account
b. Bill
looks at the $20 price tag on a clock to see how much money he would need to
purchase it.
multiple
choice 2
Medium of exchange
Store of value
Unit of account
c. Maria
writes a check to pay her electric bill.
multiple
choice 3
Store of value
Medium of exchange
Unit of account
d. Susan
transfers some of her wealth from her checking account into a certificate of
deposit that earns interest.
multiple
choice 4
Unit of account
Store of value
Medium of exchange
Question 5
The
Federal Reserve District Banks are divided:
multiple
choice
into geographical regions with the majority of the district banks located in
the eastern half of the United States.
evenly geographically to ensure the same amount of area coverage for the
regions of the United States.
geographically to encompass the 12 largest metropolitan and financial areas in
the United States.
into geographical regions with the same number of states located in each of the
districts.
Question 6
Which of
the following are liabilities to a bank?
Multiple
Choice
vault cash and demand deposits
property and capital stock
demand and time deposits
capital stock and reserves
Question 7
If the
reserve requirement is 20% and commercial bankers decide to hold additional
excess reserves equal to 5% of any newly acquired checkable deposits, then the
effective monetary multiplier for the banking system will be
Multiple
Choice
4.
5.
6.
3.
Question 8
Members of
the Federal Reserve Board of Governors are
Multiple
Choice
selected by the Federal Open Market Committee for 4-year terms.
appointed by the president to staggered 14-year terms.
appointed by Congress to staggered 14-year terms.
selected by each of the Federal Reserve banks for 4-year terms.
Question 9
Money is
\”created\” when
Multiple
Choice
people use money to pay for stuff they buy from one another.
someone lends money to a friend or a family member.
a bank grants a loan to a customer.
a depositor deposits money at the bank.
Question
10
A
checkable deposit at a commercial bank is a(n)
Multiple
Choice
asset to the depositor and a liability to the bank.
liability to both the depositor and the bank.
liability to the depositor and an asset to the bank.
asset to both the depositor and the bank.
Question
11
Money
eliminates the need for a coincidence of wants in trading primarily through its
role as a
Multiple
Choice
medium of deferred payment.
medium of exchange.
unit of account.
store of value.
Question
12
The coupon
rate is the
Multiple
Choice
interest rate promised when a bond is issued.
amount originally lent.
regular payment of interest to a bondholder.
maximum interest rate that can be paid on a bond.
Question
13
The reason
for the Fed being set up as an independent agency of government is to
Multiple
Choice
allow it to earn profits like private firms.
protect it from political pressure.
let it be able to compete with other financial institutions.
make it be managed and controlled by member banks.
Question
14
A bank's
required reserves can be calculated by
Multiple
Choice
multiplying its checkable-deposit liabilities by its excess reserves.
dividing its excess reserves by its required reserves.
dividing its required reserves by its excess reserves.
multiplying its checkable-deposit liabilities by the reserve ratio.
Question
15
The
Federal Open Market Committee (FOMC)
Multiple
Choice
monitors regulatory banking laws for member banks.
provides advice on banking stability to the Fed.
follows the actions and operations of financial markets to keep them open and
competitive.
sets policy on the sale and purchase of government bonds by the Fed.
Question
16
When a
consumer wants to compare the price of one product with another, money is
primarily functioning as a
Multiple
Choice
checkable deposit.
medium of exchange.
unit of account.
store of value.
Question
17
Which
definition(s) of the money supply include(s) only items that are directly and
immediately usable as a medium of exchange?
Multiple
Choice
M2
M1
M1 and M2
neither M1 nor M2
Question
18
The
Federal Reserve System consists of which of the following?
Multiple
Choice
Federal Open Market Committee and Office of Thrift Supervision
U.S. Treasury Department and Bureau of Engraving and Printing
Board of Governors and the 12 Federal Reserve Banks
Federal Deposit Insurance Corporation and Controller of the Currency
Question
19
Assets of
the commercial banking system include
Multiple
Choice
reserves and deposits.
reserves and loans.
loans and deposits.
deposits.
Question
20
If the
reserve requirement were 15% percent, the value of the monetary multiplier
would be
Multiple
Choice
7.32.
6.67.
5.50.
8.54.
Question
21
Assume
that the required reserve ratio is 20%. A business deposits a $50,000 check at
Bank A; the check is drawn against Bank B. What happens to the reserves at Bank
A and Bank B?
Multiple
Choice
increase by $10,000 at Bank A and decrease by $50,000 at Bank B
Reserves stay the same in both banks.
increase by $10,000 at Bank A and decrease by $10,000 at Bank B
increase by $50,000 at Bank A and decrease by $50,000 at Bank B
Question
22
An
increase in nominal GDP will
Multiple
Choice
increase the transactions demand for money but decrease the total demand for
money.
decrease the transactions demand for money but increase the total demand for
money.
increase the transactions demand and the total demand for money.
decrease the transactions demand and the total demand for money.
Question
23
Traditionally,
the Federal Reserve can give emergency loans only to
Multiple
Choice
manufacturing firms.
securities firms.
investment banks.
commercial banks.
Question
24
Use the
following graph to answer the next question.
Which line
in the graph above would best illustrate the asset demand for money curve?
Multiple
Choice
Line 3
Line 2
Line 4
Line 1
Question
25
Fractional
reserve banking refers to a system where banks
Multiple
Choice
grant loans to their borrowing customers.
accept a portion of their deposits in checkable accounts.
deposit a fraction of their reserves at the central bank.
hold only a fraction of their deposits in their reserves.
Question
26
What
function is money serving when you deposit it in a savings account?
Multiple
Choice
a checkable deposit
a medium of exchange
a store of value
a unit of account
Question
27
Which of
the following items are included in money supply M2 but not M1?
Multiple
Choice
savings deposits
Federal Reserve notes
checkable deposits
coins
Question
28
A wealthy
executive is holding money, waiting for a good time to invest in the stock
market. This action would be an example of the
Multiple
Choice
asset demand for money.
transactions demand for money.
creation of fiat money.
use of money as a medium of exchange.
Question
29
The main
function of the Federal Reserve System is to
Multiple
Choice
clear checks from member banks.
set reserve requirements of banks.
control the money supply.
serve as the fiscal agent for the federal government.
Question
30
Cash held
by a bank in its vault is a part of the bank\’s
Multiple
Choice
liabilities.
money supply.
net worth.
reserves.
ECO372
Week 4 Practice Money and the Federal Reserve Quiz – SCORE 100 PERCENT
Question 1
Suppose
that Ava withdraws $300 from her savings account at Second Bank. The reserve
requirement facing Second Bank is 10%. Assume the bank does not wish to hold
any excess reserves of new deposits.
Use this
information to complete the balance sheet below to show how
Second Bank's assets and liabilities change when Ava withdraws the $300 from
the bank.
Instructions:
Enter your answers as a whole number. If you are entering any negative numbers
be sure to include a negative sign (-) in front of those numbers.
A Simple
Bank Balance Sheet
|
Assets |
Liabilities |
|
Change in Reserves: $ -30 Numeric Response 1.
Edit Unavailable. -30 correct. |
Change in Deposits: $ -300 Numeric
Response 2. Edit Unavailable. -300 correct. |
|
Change in Loans: $ -270 Numeric Response 3. Edit
Unavailable. -270 correct. |
|
Question 2
The
Federal Reserve District Banks are divided:
multiple
choice
evenly geographically to ensure the same amount of area coverage for the
regions of the United States.
into geographical regions with the majority of the district banks located in
the eastern half of the United States.
into geographical regions with the same number of states located in each of the
districts.
geographically to encompass the 12 largest metropolitan and financial areas in
the United States.
Question 3
Suppose the Federal Reserve increases the amount of reserves by $100
million and the total money supply increases by $500 million.
Instructions: Enter your answers as a whole number.
a. What is the money multiplier?
5 million
b. Using the money multiplier from part a, how much will the money
supply change if the Federal Reserve increases reserves by $50 million?
$ 250 million
Question 4
Use the
following table to determine the levels of M1 and M2 in the United States.
Money
Categories in the United States
|
Asset |
Amount (billions of dollars) |
|
Currency |
$82 |
|
Demand deposits |
80 |
|
Money market funds |
44 |
|
Other checkable deposits |
37 |
|
Savings deposits |
460 |
|
Small time deposits |
22 |
|
Traveler's checks |
4 |
Instructions:
Enter your answers as a whole number.
a.
Calculate the M1 money supply.
$
203 billion
b.
Calculate the M2 money supply.
$
729 billion
Question 5
Money is:
multiple
choice
the gold and silver behind the currency and the coins that are issued by the
government.
anything that both buyers and sellers will accept in exchange for goods and
services.
only the printed paper currency and the coins that are produced by the
government.
any good that buyers and sellers have a desire to purchase, use, or hold.
Question 6
The part
of the Federal Reserve that determines and implements the nation's monetary
policy and controls the money supply to promote stable prices and economic
growth is the:
multiple
choice
president of the Board of Governors.
12 Federal Reserve District Banks.
Federal Open Market Committee.
Board of Governors.
Question 7
For each
of the following scenarios, determine whether money is being used as a medium
of account, store of value, or unit of account.
a. Sam
gives the grocery store clerk a $5 bill to pay for his purchase.
multiple
choice 1
Unit of account
Store of value
Medium of exchange
b. Bill
looks at the $20 price tag on a clock to see how much money he would need to
purchase it.
multiple
choice 2
Unit of account
Medium of exchange
Store of value
c. Maria
writes a check to pay her electric bill.
multiple
choice 3
Store of value
Unit of account
Medium of exchange
d. Susan
transfers some of her wealth from her checking account into a certificate of
deposit that earns interest.
multiple
choice 4
Store of value
Unit of account
Medium of exchange
Question 8
The
Federal Reserve System consists of which of the following?
Multiple
Choice
Federal Deposit Insurance Corporation and Controller of the Currency
Board of Governors and the 12 Federal Reserve Banks
U.S. Treasury Department and Bureau of Engraving and Printing
Federal Open Market Committee and Office of Thrift Supervision
Question 9
Money
functions as a store of value if it allows you to
Multiple
Choice
make exchanges in a more efficient manner.
delay purchases until you want the goods.
measure the value of goods in a reliable way.
increase your confidence in money.
Question
10
The
Federal Reserve System was established by the Federal Reserve Act of
Multiple
Choice
1913.
1933.
1955.
1945.
Question
11
The M1
measure of money consists of the sum of
Multiple
Choice
currency and travelers' checks.
currency, checking deposits, and savings deposits.
currency, checking deposits, and travelers' checks.
checking deposits and travelers' checks.
Question
12
The M2
measure of money consists of the sum of
Multiple
Choice
savings deposits, small time deposits, and money market mutual funds.
M1, savings deposits, small time deposits, and money market mutual funds.
M1, checking and savings deposits, and currency.
currency, checking and savings deposits, and small time deposits.
Question
13
Money is
\”created\” when
Multiple
Choice
people use money to pay for stuff they buy from one another.
someone lends money to a friend or a family member.
a depositor deposits money at the bank.
a bank grants a loan to a customer.
Question
14
When a
consumer wants to compare the price of one product with another, money is
primarily functioning as a
Multiple
Choice
unit of account.
checkable deposit.
store of value.
medium of exchange.
Question
15
Which of
the following are liabilities to a bank?
Multiple
Choice
capital stock and reserves
demand and time deposits
vault cash and demand deposits
property and capital stock
Question
16
The
Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily
for
Multiple
Choice
supervising banks to make sure that markets are open to all and remain
competitive.
setting the Fed's monetary policy and directing the purchase and sale of
government securities.
issuing currency and acting as the fiscal agent for the federal government.
maintaining cash reserves that can be used to settle international
transactions.
Question
17
If you put
a $20 bill in the pocket of your winter coat at the beginning of spring so that
you will be surprised when you find it again next winter, you are using money
as
Multiple
Choice
a unit of account.
bank reserves.
a medium of exchange.
a store of value.
Question
18
If the
reserve requirement were 15% percent, the value of the monetary multiplier
would be
Multiple
Choice
7.32.
5.50.
6.67.
8.54.
Question
19
Which
definition(s) of the money supply include(s) only items that are directly and
immediately usable as a medium of exchange?
Multiple
Choice
M2
M1 and M2
neither M1 nor M2
M1
Question
20
Members of
the Federal Reserve Board of Governors are
Multiple
Choice
appointed by the president to staggered 14-year terms.
appointed by Congress to staggered 14-year terms.
selected by each of the Federal Reserve banks for 4-year terms.
selected by the Federal Open Market Committee for 4-year terms.
Question
21
The
Federal Open Market Committee (FOMC)
Multiple
Choice
monitors regulatory banking laws for member banks.
sets policy on the sale and purchase of government bonds by the Fed.
follows the actions and operations of financial markets to keep them open and
competitive.
provides advice on banking stability to the Fed.
Question
22
Use the following graph to answer the next question.
Which line in the graph would best illustrate the supply of money curve?
Multiple
Choice
Line 1
Line 4
Line 3
Line 2
Question
23
Other
things being equal, an expansion of commercial bank lending
Multiple
Choice
increases the money supply.
changes the composition, but not the size, of the money supply.
is desirable during a period of demand-pull inflation.
reduces the money supply.
Question
24
The
required-reserve ratio is equal to a commercial bank\’s
Multiple
Choice
checkable-deposit liabilities multiplied by its excess reserves.
required reserves divided by its checkable-deposit liabilities.
excess reserves divided by its required reserves.
checkable-deposit liabilities divided by its required reserves.
Question
25
A
checkable deposit at a commercial bank is a(n)
Multiple
Choice
liability to both the depositor and the bank.
asset to both the depositor and the bank.
liability to the depositor and an asset to the bank.
asset to the depositor and a liability to the bank.
Question
26
The reason
for the Fed being set up as an independent agency of government is to
Multiple
Choice
make it be managed and controlled by member banks.
let it be able to compete with other financial institutions.
allow it to earn profits like private firms.
protect it from political pressure.
Question
27
The
equilibrium rate of interest in the market for money is determined by the
intersection of the
Multiple
Choice
supply-of-money curve and the transactions-demand-for-money curve.
supply-of-money curve and the asset-demand-for-money curve.
investment-demand curve and the total-demand-for-money curve.
supply-of-money curve and the total-demand-for-money curve.
Question
28
If the
reserve requirement is 20% and commercial bankers decide to hold additional
excess reserves equal to 5% of any newly acquired checkable deposits, then the
effective monetary multiplier for the banking system will be
Multiple
Choice
6.
3.
5.
4.
Question
29
The coupon
rate is the
Multiple
Choice
amount originally lent.
regular payment of interest to a bondholder.
maximum interest rate that can be paid on a bond.
interest rate promised when a bond is issued.
Question
30
Money
eliminates the need for a coincidence of wants in trading primarily through its
role as a
Multiple
Choice
medium of deferred payment.
store of value.
medium of exchange.
unit of account.
Question
31
A bank's
required reserves can be calculated by
Multiple
Choice
multiplying its checkable-deposit liabilities by the reserve ratio.
multiplying its checkable-deposit liabilities by its excess reserves.
dividing its required reserves by its excess reserves.
dividing its excess reserves by its required reserves.
Question
32
One
hundred percent reserve banking refers to a situation in which banks' reserves
equal One hundred percent of their
Multiple
Choice
income.
deposits.
loans.
profits.
Question
33
Credit
card balances are not considered to be money primarily because they
Multiple
Choice
are rarely used to make purchases.
do not represent an obligation to pay someone else.
are an asset used in making transactions.
are not part of people's wealth.
Question
34
Fractional
reserve banking refers to a system where banks
Multiple
Choice
grant loans to their borrowing customers.
accept a portion of their deposits in checkable accounts.
deposit a fraction of their reserves at the central bank.
hold only a fraction of their deposits in their reserves.
Question
35
A bank has
$2 million in checkable deposits. In the bank's balance sheet, this would be
part of
Multiple
Choice
net worth.
liabilities.
assets.
capital stock.
Question
36
drawn
against Bank B. What happens to the reserves at Bank A and Bank B?
Multiple
Choice
Reserves stay the same in both banks.
increase by $10,000 at Bank A and decrease by $10,000 at Bank B
increase by $50,000 at Bank A and decrease by $50,000 at Bank B
increase by $10,000 at Bank A and decrease by $50,000 at Bank B
Question
37
Assume
that the required reserve ratio is 20%. A business deposits a $50,000 check at
Bank A; the check is
A wealthy
executive is holding money, waiting for a good time to invest in the stock
market. This action would be an example of the
Multiple
Choice
asset demand for money.
transactions demand for money.
use of money as a medium of exchange.
creation of fiat money.
Question
38
The
transactions demand for money is least likely to be a function of the
Multiple
Choice
frequency of wage and salary payments.
interest rate.
price level.
level of national income.
Question
39
An
increase in nominal GDP will
Multiple
Choice
increase the transactions demand for money but decrease the total demand for
money.
decrease the transactions demand and the total demand for money.
increase the transactions demand and the total demand for money.
decrease the transactions demand for money but increase the total demand for
money.
Question
40
One year
before maturity the price of a bond with a principal amount of $1,000 and a
coupon rate of 5% paid annually fell to $981. The one year interest rate must
be
Multiple
Choice
7.0%.
8.5%.
5.0%.
1.9%.
Question
41
A consumer
holds money to meet spending needs. This would be an example of the
Multiple
Choice
use of money as legal tender.
asset demand for money.
transactions demand for money.
use of money as a measure of value.
Question
42
The main
function of the Federal Reserve System is to
Multiple
Choice
control the money supply.
set reserve requirements of banks.
serve as the fiscal agent for the federal government.
clear checks from member banks.
Question
43
Which of
the following items are included in money supply M2 but not M1?
Multiple
Choice
Federal Reserve notes
checkable deposits
coins
savings deposits
Question
44
The
functions of money are to serve as a
Multiple
Choice
factor of production, exchange, and aggregate supply.
unit of account, a store of value, and a medium of exchange.
resource allocator, a method for accounting, and a means of income
distribution.
determinant of consumption, investment, and government spending.
Question
45
A bank\’s
net worth is equal to its
Multiple
Choice
profits plus its assets.
assets minus its liabilities.
liabilities minus its assets.
assets plus its liabilities.
Question
46
Traditionally,
the Federal Reserve can give emergency loans only to
Multiple
Choice
securities firms.
investment banks.
manufacturing firms.
commercial banks.
Question
47
Which
group is responsible for the policy decision of changing the money supply?
Multiple
Choice
Federal Open Market Committee
Federal Advisory Council
Office of Management and Budget
Thrift Advisory Council
Question
48
Use the following graph to answer the next question.
Which line in the graph above would best illustrate the asset demand for
money curve?
Multiple
Choice
Line 2
Line 1
Line 3
Line 4
Question
49
Cash held
by a bank in its vault is a part of the bank\’s
Multiple
Choice
reserves.
money supply.
net worth.
liabilities.
Question
50
If product
prices were stated in terms of tobacco leaves, then tobacco leaves would be
functioning primarily as
Multiple
Choice
legal tender.
a unit of account.
fiat money.
a store of value.
ECO372
Week 5 Discussion – Fiscal Policy
Compare and contrast expansionary and contractionary
fiscal policy.
ECO372T
Week 5 Apply Fiscal and Monetary Policy SCORE 98 PERCENT
Question 1
The graph below depicts an economy where an increase in aggregate demand
has caused inflation. The economy's current level of real GDP (Y2)
is above its long-run equilibrium. This is illustrated by the long-run
aggregate supply curve (LRAS) and a price level (P2) above the
equilibrium value of Pe.
Which of the following is an example of an automatic stabilizer that
would help this economy move toward full employment again?
multiple choice
A reduction in the average tax rate
An increase in the average tax rate
A decrease in government purchases
A reduced need for government transfer payments
Question 2
For each of the following scenarios, determine which time lag is
most likely to result when designing and implementing fiscal policy.
a. The separation of power demonstrated between the legislative and
executive branches of government combined with strong partisanship attitude
among our elected politicians.
multiple choice 1
Recognition lag
Legislative lag
Implementation lag
All of these lags
b. The fact that it takes economists working for the National Bureau of
Economic Research months to declare the dates of peaks and troughs.
multiple choice 2
Recognition lag
Legislative lag
Implementation lag (Incorrect)
All of these lags
c. The time it takes to design and build new infrastructure after these
projects have been passed by the legislature.
multiple choice 3
Recognition lag (Incorrect)
Legislative lag
Implementation lag
All of these lags
Question 3
If the U.S. Congress passes legislation to raise taxes to control
demand-pull inflation, then this would be an example of a(n)
Multiple Choice
contractionary fiscal policy.
supply-side fiscal policy.
nondiscretionary fiscal policy.
expansionary fiscal policy.
Question 4
When changes in taxes and government purchases occur in the economy
without explicit action by Congress, such changes are referred to as
implicit stabilization.
cyclical stabilization.
automatic stabilizers.
discretionary fiscal policy.
Question 5
If taxes and government expenses did not vary with income, then income
would
Multiple Choice
be less stable.
be more stable.
be closer to potential income.
not change.
Question 6
When the
federal government changes purchases and/or taxes to stimulate the economy or
rein in inflation, such policy is
Multiple
Choice
active monetary policy.
discretionary fiscal policy.
automatic fiscal policy.
active federal policy.
Question 7
As the
economy declines into recession, the collection of personal income tax revenues
automatically falls. This phenomenon best illustrates how a progressive
income-tax system
Multiple
Choice
increases crowding out in the economy.
serves as an automatic stabilizer for the economy.
offsets the timing problem for fiscal policy.
decreases real interest rates in the economy.
Question 8
When the
federal government cuts taxes and increases purchases to stimulate the economy
during a period of recession, such actions are designed to be
Multiple
Choice
expansionary.
contractionary.
passive.
automatic.
Question 9
Due to
automatic stabilizers, when the nation’s total income rises, government transfer
payments
Multiple
Choice
and tax revenues increase.
increase and tax revenues decrease.
decrease and tax revenues increase.
and tax revenues decrease.
Question
10
Which of
the following is an example of built-in stability? As real GDP decreases,
Multiple
Choice
income tax revenues decrease and transfer payments increase.
income tax revenues and transfer payments both decrease.
income tax revenues increase and transfer payments decrease.
income tax revenues and transfer payments both increase.
Question
11
One timing
problem in using fiscal policy to counter a recession is the “legislative lag”
that occurs between the
Multiple
Choice
time fiscal action is taken and the time that the action has its effect on the
economy.
start of the recession and the time it takes to recognize that the recession
has started.
time the need for the fiscal action is recognized and the time that the action
is taken.
start of a predicted recession and the actual start of the recession.
Question
12
When the
federal government uses taxation and purchasing actions to stimulate the
economy it is conducting
Multiple
Choice
monetary policy.
employment policy.
incomes policy.
fiscal policy.
Question
13
Using
fiscal policy to stabilize the economy is difficult because
Multiple
Choice
there are time lags involved in the use of fiscal policy.
potential income is known.
the effects of policy changes are known with certainty.
the size of the government debt doesn't matter.
Question
14
Fiscal
policy is enacted through changes in
Multiple
Choice
the supply of money and foreign exchange.
interest rates and the price level.
unemployment and inflation.
taxation and government purchases.
Question
15
The time
that elapses between the beginning of a recession or an inflationary episode
and the identification of the macroeconomic problem is referred to as a(n)
Multiple
Choice
recognition lag.
budget lag.
implementation lag.
legislative lag.
Question
16
Choose the
best response for each of the following statements.
a. When
the Federal Reserve makes an open market purchase, the Fed:
multiple
choice
sells bonds to the public, which decreases the money supply.
buys bonds from the public, which increases the money supply.
sells bonds to the public, which increases the money supply.
buys bonds from the public, which decreases the money supply.
b. If the
Fed wants to increase interest rates, it should make an open market sale .
This would decrease the money supply and achieve the increase in interest
rates.
Question
17
a. The
discount rate is the:
multiple
choice 1
interest rate at which banks can borrow reserves from the Federal Reserve.
interest rate at which banks can borrow reserves from other banks.
lowest interest rate that banks can charge for loans to their most creditworthy
customers.
lowest interest rate that banks can charge for lending reserves to other banks
or financial institutions.
b. If the
Fed were to decrease the discount rate, banks will borrow:
multiple
choice 2
more reserves, causing a decrease in lending and the money supply.
more reserves, causing an increase in lending and the money supply.
fewer reserves, causing a decrease in lending and the money supply.
fewer reserves, causing an increase in lending and the money supply.
Question
18
The
interest rate that the Fed charges on loans made directly to banks is called
_____.
Multiple
Choice
the prime rate
interest on reserves
the federal funds rate
the discount rate
Question
19
Economic
investment refers to _____.
Multiple
Choice
postponing purchases of goods and services.
making new additions to a firm’s stock of capital.
selling a financial asset for a gain.
buying a financial asset for a gain.
Question
20
An
increase in the money supply, all else held constant, usually _____.
Multiple
Choice
decreases the interest rate and decreases aggregate demand
decreases the interest rate and increases aggregate demand
increases the interest rate and decreases aggregate demand
increases the interest rate and increases aggregate demand
Question
21
If the Fed
sells government securities to the general public in the open market, the
_____.
Multiple
Choice
Fed gives the securities to the public; the public pays for the securities by
writing checks that when cleared will increase commercial bank reserves at the
Fed
public gives the securities to the Fed in exchange for a Fed check, which when
deposited at commercial banks will decrease their reserves at the Fed
public gives the securities to the Fed in exchange for a Fed check, which when
deposited at commercial banks will increase their reserves at the Fed
Fed gives the securities to the public; the public pays for the securities by
writing checks that when cleared will decrease commercial bank reserves at
Question
22
Which of
the monetary policy tools can alter both the level of excess reserves and the
money multiplier?
Multiple
Choice
The federal funds rate
The reserve requirement
The discount rate
Open-market operations
Question
23
The
interest rate at which the Federal Reserve Banks lend to commercial banks is
called the _____.
Multiple
Choice
short-term rate
federal funds rate
discount rate
prime rate
Question
24
The
purchase and sale of government securities by the Fed is called _____.
Multiple
Choice
federal funds market
money market transactions
term auction facility
open market operations
Question
25
The
purpose of expansionary monetary policy is to increase _____.
Multiple
Choice
real GDP
the GDP gap
interest rates
the inflation rate
Question
26
The
discount rate is the interest _____.
Multiple
Choice
rate at which commercial banks lend to the public
yield on long-term government bonds
rate at which the Federal Reserve Banks lend to commercial banks
rate at which the central banks lend to the U.S. Treasury
Question
27
Financial
markets pay close attention to changes in the federal funds rate because these
changes _____.
Multiple
Choice
affect other interest rates in the economy
indicate commercial bank lending policies
directly affect the interest payments on the national debt
directly affect a large volume of loans
Question
28
The Fed directly
sets _____.The Fed directly sets _____.
Multiple
Choice
neither the federal funds rate nor the prime rate
the prime rate but not the federal funds rate
the discount rate and the prime rate
both the federal funds rate and the prime rate
Question
29
Which of
the following statements is true?
Multiple
Choice
The Federal Reserve does not set the federal funds rate, but it influences it
through the use of its open-market operations.
The Federal Reserve sets the federal funds rate.
The Federal Reserve will set a higher target for the federal funds rate if
pursuing an expansionary monetary policy.
The Federal Reserve sets the target for the federal funds rate, and then uses
the reserve requirement to push banks toward that target.
Question
30
When the
Federal Reserve Banks decide to buy government bonds from banks and the public,
the supply of reserves in the federal funds market _____.
Multiple
Choice
increases and the federal funds rate increases
decreases and the federal funds rate increases
decreases and the federal funds rate decreases
increases and the federal funds rate decreases
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