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- 1. Multiple Choice
Supporters of fiscal policy believe that inflation can be reduced by
Increasing taxes and/or reducing government spending.
Increasing the rate of increase of the money supply.
Cutting taxes and increasing interest rates.
Cutting social welfare programs and redistributing income.
- 2. Multiple Choice
In determining the GDP,
A dollar is used as the common measure
The quantity of items produced is added up
The quality of goods is considered
Both new and used goods are included.
- 3. Multiple Choice
The total dollar value of all the nation’s final goods and services produced over the course of a year is called
Net exports
Disposable personal income
national income accounting
Gross domestic product.
- 4. Multiple Choice
The Federal Reserve System was established to
Ensure a safe and uniform currency
Regulate thrift institution
Establish a gold standard
Control the amount of money in circulation
- 5. Multiple Choice
When inflation occurs, the purchasing power of the dollar
goes down
goes up
is not affected
cannot be measured
- 6. Multiple Choice
Which of the following describes what happens when the price level goes up and wages and other costs of production do not?
Producers will want to supply less to the marketplace.
Producers will want to supply more to the marketplace
Overall profits will decrease.
Profits will not be affected.
- 7. Multiple Choice
The nation is divided into how many Federal Reserve districts?
10 c. 25 12 d. 50
10
12
25
50
- 8. Multiple Choice
The best example of a physical flow in the product market is
a credit card payment
labor for a factory
an automobile
farm land
- 9. Multiple Choice
The best example of an expenditure from government to households would be
Sales tax c. labor force Paycheck d. An unemployment check
Sales tax
paycheck
labor force
an unemployment check
- 10. Multiple Choice
If the FED lowers the reserve requirement,
Less money is available to loan
More money is available to loan
banks lose business
Fewer people get credit
- 11. Multiple Choice
To decrease the money supply, the FED can
Decrease the reserve requirement
Buy more Treasury bills
increase the reserve requirement
Request permission from Congress
- 12. Multiple Choice
Which of the following might result if the FED increases the discount rate?
Increase in the total money supply
Banks borrow more reserves
banks make more loans available
Increase in the prime rate
- 13. Multiple Choice
The circular flow model of a mixed economy shows
How taxes and profits are related in the product and factor markets
Only how firms and households interact in the product and factor markets
How government interacts with households and firms in the product and factor markets
How government plans the economy in both the product and factor markets
- 14. Multiple Choice
Decisions to raise or lower interest rates are made by the
Board of Governors of the FED
Committee Federal Advisory Council
Federal Open Market Committee
President
- 15. Multiple Choice
The primary responsibility of the FED is to
Clear checks
Regulate the money supply.
mint coins
Supervise Banks
- 16. Multiple Choice
Each of the following is an example of physical flow in the Factor Market EXCEPT
Factory labor
soy from a farm
used computers
paycheck
- 17. Multiple Choice
Why would the government most likely use an expansionary fiscal policy?
To slow down the economy because fast-growing demand can exceed supply
To control the demand for consumer goods and services
To encourage growth and try to stop or prevent recession
To help lower prices to fight inflation
- 18. Multiple Choice
According to Keynesian economics, the government could prevent, or reduce the severity of, inflation by
Cutting taxes
Applying a contractionary fiscal policy
applying an expansionary policy
Increasing federal spending
- 19. Multiple Choice
An example of expansionary fiscal policy would be cutting
Income taxes
Workers’ wages
production of consumers’ goods
Government spending
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