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- 1. Multiple Choice
Which of the following actions might the Federal Reserve take together that will both increase the money supply?
open market sales, decreasing the reserve requirement
increasing the reserve requirement, decreasing the discount rate
open market purchases, increasing the reserve requirement
open market purchases, decreasing the reserve requirement
- 2. Multiple Choice
The IRS lays off thousands of employees every year after April 15th. This is an example of
seasonal unemployment
cyclical unemployment
frictional unemployment
structural unemployment
- 3. Multiple Choice
What can one assume from the following headline: "President and Congress Feud Over Fiscal Policy"?
The President and Congress cannot agree on a tax plan and/or budget.
The President favors higher taxes, but Congress opposes them.
Congress and the President cannot agree on defense spending.
Congress and the President cannot agree on interest rates.
- 4. Multiple Choice
If the government of Sri Lanka spends $13 million more this year than it receives in revenue, what can we say for certainty?
Sri Lanka's revenue will grow.
Sri Lanka will experience a budget deficit.
Sri Lanka will experience a trade deficit.
Sri Lanka will experience a trade surplus.
- 5. Multiple Choice
Congress approves a budget that allocates spending on defense, education, social programs, etc., but also increases taxes to pay for this. What does this plan define?
the government's monetary policy
the government's revenue
the government's reserves requirement
the government's fiscal policy
- 6. Multiple Choice
Which of the following is a monetary policy that might be used to reduce inflation?
decreasing taxation
decreasing the discount rate
open market sales
increasing government spending
- 7. Multiple Choice
The consumer price index (CPI) is an indicator of which of the following?
the size of the economy
the velocity of money
the level of inflation or deflation
the presence of a budget deficit or surplus
- 8. Multiple Choice
Which of the following is one of the tasks conducted by the Federal Reserve System?
executing fiscal policy
printing money
setting the federal government's budget
making loans to commercial banks
- 9. Multiple Choice
GDP, CPI, and the unemployment rate are all
signs that the economy is peaking.
signs that the economy is in contraction.
economic indicators used to determine the state and direction of the economy.
the result of economic expansion.
- 10. Multiple Choice
Due to inflation, the Federal Reserve decides to decrease the money supply. Which of the following will they MOST LIKELY due?
lower the discount rate
implement an "easy money" policy
buy bonds
raise the reserve requirement for banks
- 11. Multiple Choice
Saying that net exports are positive is the same as saying that
there is a current account surplus
there is a capital account surplus
there is a current account deficit
the same weight of goods has been imported as were exported
- 12. Multiple Choice
A pair of shoes that costs $80 last month costs $100 this month. Which of the following BEST describes this economic condition?
inflation
recession
stagflation
competition
- 13. Multiple Choice
The way the government conducts spending and taxation is called
monetary policy
economic policy
free enterprise policy
fiscal policy
- 14. Multiple Choice
The way the government chooses to control the money supply is called
monetary policy
open market operation
reserve requirement and discount rate
fiscal policy
- 15. Multiple Choice
Which of the following might be a sign of an economic trough?
low unemployment
recession
high GDP
stable CPI
- 16. Multiple Choice
Fiscal policy is MOST influenced by
Congress
the Federal Reserve
the federal board of governors
businesses
- 17. Multiple Choice
What effect does a "tight money" policy have on the reserve requirement and the money supply?
It raises the reserve requirement, thereby increasing the money supply.
It lowers the reserve requirement, thereby decreasing the money supply.
It raises the reserve requirement, thereby decreasing the money supply.
It lowers the reserve requirement, thereby increasing the money supply.
- 18. Multiple Choice
Consumers reduce spending because they lack confidence in the economy. All else being equal, what effect will this have on the price level and GDP?
Both prices and real GDP will decline.
Both prices and real GDP will increase.
Prices will increase, but real GDP will be unaffected.
Prices will decrease, but real GDP will be unaffected.
- 19. Multiple Choice
If one wanted to know whether there had been inflation or not, the BEST measure to observe would be the
GDP
business cycle
CPI
national debt
- 20. Multiple Choice
Which of the following are responsible for making fiscal policy decisions?
the Federal Reserve System
the National Council of Economic Advisors
the President and Congress
the Commerce Department
- 21. Multiple Choice
Which of the following statements BEST differentiates between the terms debt and deficit?
Debt and deficit are synonymous
Debt means more money is flowing out than coming in, and deficit is the total amount owed
Deficit means more money is flowing out than coming in, and debt is the total amount owed
Debt and deficit are completely unrelated terms
- 22. Multiple Choice
To stimulate the economy, the Federal Reserve decides to increase the money supply. Which of the following actions will they MOST LIKELY take?
raise the reserve requirement
raise the discount rate
sell bonds
lower the reserve requirement
- 23. Multiple Choice
If the Federal Reserve decides to sell bonds, what effect will it have?
It will cause the money supply to decrease and inflation to fall
It will cause the money supply to increase and employment to rise
It will guarantee higher taxes
It will extend stagflation
- 24. Multiple Choice
Which of the following would be MOST LIKELY to increase aggregate demand?
increasing the discount rate
decreasing government spending
increasing consumer confidence
declining consumer confidence
- 25. Multiple Choice
Which of the following is NOT calculated into the Gross Domestic Product (GDP)?
investment
net exports
aggregate supply
government spending
- 26. Multiple Choice
Monetary policy MOST affects
the amount of taxes citizens pay.
the amount of money government spends
the price of stock in sole proprietorships
interest rates on loans
- 27. Multiple Choice
Fiscal policy is concerned with
government spending and taxation.
consumer spending and productivity.
government spending and the money supply.
taxation and inflation.
- 28. Multiple Choice
The government is concerned that economic growth is too high, unsustainable, and inflation is resulting. What might be done to stop this?
increasing taxation
open market sales
decreasing taxation
increasing government spending
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