Question

1.Budget deficit is the amount of money the government borrows for one budget (1 year) and national debt is the sum of all government borrowing.
A. True
B. False

2.Which of the following is a main economic variable that affects business cycles?
A. stagflation
B. national income accounting
C. interest rates
D. personal savings

3.After an economy has reached its peak, it begins the ______ phase of the business cycle.
A. Recession
B. Trough
C. Contraction
D. Expansion

Answer 1

Which of the following is considered a cause of inflation?
A. Wages go down.
B. Producers raise prices to meet higher costs.
C. There is not enough money in the economy.
D. Demand is less than supply.

The main job of the Office of Management and Budget is to
A. prepare Congressional appropriations bills.
B. create the federal budget based on the needs of various agencies.
C. coordinate the work of Congressional committees in order to create a budget bill.
D. approve or disapprove the federal budget proposed by Congress.

Which goods would be included in the calculation of GDP?
A. toys made in China at a factory owned by a U.S. company
B. cars made in Tennessee at a factory owned by a Japanese car company
C. plastic made in Kentucky and sold to a toy maker in Ohio
D. cotton cloth made in India and sold to clothes makers in the United States

How does the expenditure approach calculate GDP?
A. It adds up all the incomes in the economy.
B. It adds up the value of four groups of final goods and services.
C. It adds up the value of business goods and services.
D. It adds up the value of consumer goods and services.

What is one of the major problems caused by a high national debt?
A. It prevents the federal government from balancing the budget.
B. Money spent on servicing the debt causes prices to rise.
C. It prevents foreign governments from investing in U.S. businesses.
D. Money spent on servicing the debt cannot be spent on other things.

Why does unemployment rise when the economy slows?
A. Decreased demand for goods causes demand for labor to go down.
B. Decreased demand for goods causes the cost of labor to go up.
C. Increased demand for goods causes demand for labor to go down.
D. The slower economy makes companies less likely to outsource jobs.

Approximately how much total income did a family of four need to have to be considered above the poverty line in 2006?
A. $11,275
B. $14,500
C. $16,530
D. $20,000

Answer 2

11. What is an example of a positive external shock to aggregate supply?
A. Good weather leads to an unusually productive harvest for corn farmers.
B. A popular new diet encourages consumers to buy more corn flakes.
C. Demand for new suburban houses increases the value of farmland.
D. China announces that it plans to import more corn from the United States.

12.Near money includes
A. demand deposits.
B. credit and debit cards.
C. traveler’s checks.
D. savings deposits.

13. Which type of unemployment rises during economic downturns and falls when the economy improves?
A. Seasonal
B. Structural
C. Frictional
D. Cyclical

14. What economic theory did Ronald Reagan base his policies upon after becoming President in 1980?
A. supply-side economics
B. Keynesian economics
C. demand-side economics
D. classical economics

15. Why is the inside lag for monetary policy shorter than for fiscal policy?
A. Congress and the President can act quickly to change monetary policy.
B. The Federal Open Market Committee must get Congressional approval.
C. It can take a long time for new government spending to take effect.
D. The Federal Open Market Committee can act almost immediately.

16. Which is not a role of the Federal Reserve?
A. Providing loans to individuals
B. Check clearing, supervising practices, and issuing currency for banks
C. Banker and agent for the U.S. government
D. Regulating the money supply

17. Which of these is an example of inside lag in monetary policy?
A. Congress debates funding new highways.
B. Banks hold more reserves than they are required.
C. The Fed lowers interest rates several months into a recession.
D. Corporations expand years after the Fed lowers interest rates.

18. Which of the following is an example of money as a unit of account?
A. purchasing a remote-controlled toy on sale for $8.99
B. lending your best friend $25.00 to buy a guitar
C. opening a savings account at a bank that pays high interest
D. comparing camera prices at different store before buying one

19. What is the main problem for people on a fixed income during a period of chronic inflation?
A. Their income will not increase, so their purchasing power falls.
B. They have to ask for an increase in wages to match inflation.
C. Their investments will not pay as much interest.
D. They have to wait for the government to react to the crisis.

20. What is the policy used most by the Fed to change the money supply?
A. changes in the money creation policy
B. changes in the discount rate
C. changes in the reserve requirements
D. open market operations