07 Sep ?????? Lesson 4 ??? Question 1 2.5 ??/ 2.5 points If government

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Lesson 4
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Question 1

2.5 ??/ 2.5 points
If government increases spending and wants to maintain a balanced budget, it should __________.
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decrease taxes by an equal amount
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increase taxes by an equal amount
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decrease taxes by an amount equal ??to the increase in spending multiplied by the tax multiplier
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increase taxes by an amount equal ??to the increase in spending multiplied by the tax multiplier
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Question 2

2.5 ??/ 2.5 points
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Higher real interest rates resulting from a government budget deficit will __________ the amount of loanable funds a firm demands for their investments.
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stabilize
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decrease
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not affect
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increase
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Question 3

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Which of the following is NOT a key financial institution?
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insurance companies
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stock markets
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commercial banks
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government-sponsored mortgage ??lenders
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Question 4

2.5 ??/ 2.5 points
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What was one of the biggest contributing factors that led to the failure of financial institutions during the recent economic crisis?
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low interest rates
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high employment rates
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rising home prices
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strong corporate management
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Question 5

2.5 ??/ 2.5 points
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If a firm increases its capital stock per person while holding constant the number of workers employed, the firm is said to experience __________.
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capital augmentation
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investment deepening
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labor intensity
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capital deepening
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Question 6

2.5 ??/ 2.5 points
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Nations that borrow from abroad to support current investment will __________.
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always be better off in the future
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always sacrifice future ??consumption
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be better off in the future if the ??investments are profitable
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sacrifice future consumption only ??if the investments are profitable
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Question 7

2.5 ??/ 2.5 points
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According to the text, __________ is perhaps the most critical aspect of a country’s economic performance.
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growth in GDP
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the inflation rate
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the unemployment rate
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the living standard
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Question 8

2.5 ??/ 2.5 points
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In developing countries, the highest returns are from investing in __________.
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transportation systems
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sanitation systems
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education
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defense
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Question 9

2.5 ??/ 2.5 points
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Nations with low levels of GDP per capita may converge to richer nations if __________.
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nations with high levels of income ??experience a continuously increasing growth rate
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nations with lower levels of ??income grow more quickly than those with higher levels of income
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nations with lower levels of ??income spend less on investment
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nations with lower levels of ??income grow more slowly than those with higher levels of income
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Question 10

2.5 ??/ 2.5 points
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An increase in the capital stock will __________.
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shift the production function ??downward
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shift the production function ??upward
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flatten the production function
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steepen the production function
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Question 11

2.5 ??/ 2.5 points
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What happens to U.S. GDP when foreign countries experience prosperity?
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It increases because the United ??States will export more product to those countries.
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It decreases because the foreign ??countries will now buy more of their own products.
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It decreases because the foreign ??countries will be able to export more at a lower cost.
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It does not change because U.S. ??GDP is not affected by other countries’ prosperity.
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Question 12

2.5 ??/ 2.5 points
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The multiplier that arises from equal increases in government spending and taxes is called the __________.
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simple multiplier
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tax multiplier
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balanced budget multiplier
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government spending multiplier
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Question 13

2.5 ??/ 2.5 points
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Convergence refers to closing the gap in __________ between poorer countries and richer countries.
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real GDP
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real GDP per capita
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the growth rate in real GDP
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the growth rate in real GDP per ??capita
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Question 14

2.5 ??/ 2.5 points
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Which of the following uses of tax revenues collected by the government leads to increased capital deepening?
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building roads
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increased foreign aid
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Medicare payments
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Social Security payments
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Question 15

2.5 ??/ 2.5 points
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The fraction of additional income spent on imports is called the __________.
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import function
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marginal propensity to import
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marginal propensity to export
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trade balance
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Question 16

2.5 ??/ 2.5 points
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Economic growth is severely impeded in economies __________.
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with a lack of clear property ??rights
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with a strong market system
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with high rates of convergence
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which encourage induced innovation
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Question 17

2.5 ??/ 2.5 points
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According to the method of growth accounting, which of the following contribute to economic growth?
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capital growth
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labor growth
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technological progress
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all of the above
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Question 18

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Fluctuations in the demand and supply of loanable funds will in turn bring changes to the __________ of lent and borrowed funds.
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product recipient
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mortgage-backed securities
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equilibrium quantity
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equilibrium quality
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Question 19

2.5 ??/ 2.5 points
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Suppose that for a given firm, the increase in output resulting from the last worker hired is less than the increase in output of the previous worker hired. This is an example of __________.
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diminishing returns
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constant returns
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increasing return
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capital deepening
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Question 20

2.5 ??/ 2.5 points
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If the government __________ taxes to pay for spending on infrastructure, the result will most likely be a(n. __________ in capital deepening.
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increases; increase
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decreases; increase
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increases; decrease
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eliminates; elimination
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Lesson ??5
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Question 21

2.5 ??/ 2.5 points
Equilibrium in the money market occurs when __________.
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the quantity of money demanded ??equals the quantity of money supplied
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the quantity of money demanded is ??less than the quantity of money supplied
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the quantity of money demanded is ??more than the quantity of money supplied
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the interest rate equals the money ??supply
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Question 22

2.5 ??/ 2.5 points
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The Federal Reserve System was created by the __________.
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U.S. Treasury
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President
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Congress
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Supreme Court
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Question 23

2.5 ??/ 2.5 points
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What impact does the Fed’s raising the interest rate have on the money supply and on the price level?
Question options:
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An increase in interest rates ??raises the money supply and eventually reduces prices.
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An increase in interest rates ??reduces the money demand which will slow the growth in prices.
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An increase in interest rates ??lowers the money supply and raises the money demand, which will neutralize ??price increases.
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An increase in interest rates will ??increase investment spending and GDP, which will lower prices.
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Question 24

2.5 ??/ 2.5 points
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Loans are examples of a bank’s __________.
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assets
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liabilities
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net worth
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balance sheet
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Question 25

2.5 ??/ 2.5 points
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One of the essential functions that a bank performs is __________.
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purchasing government bonds
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creating deposits by lending ??required reserves
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transferring money from savers to ??lenders
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owning assets like real estate
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Question 26

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By law, banks are required to __________.
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hold 100 percent of customer deposits ??as reserves
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hold a fraction of their reserves ??at the Federal Reserve bank
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hold a fraction of demand deposits ??as reserves
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lend out no more than the amount ??of their required reserves
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Question 27

2.5 ??/ 2.5 points
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When checks are exchanged between banks, the Fed oversees the banks to ensure the appropriate funds have been transferred. This is known as __________.
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check kiting
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check clearing
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check floating
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check balancing
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Question 28

2.5 ??/ 2.5 points
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The supply of money in the U.S. economy is determined primarily by __________.
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decisions made by the Federal ??Reserve and the U.S. Treasury
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the actions of the Federal Reserve ??and the banking system
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consumers and the banking system
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the demand for money in the ??economy
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Question 29

2.5 ??/ 2.5 points
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Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to answer the following two question(s.. Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom. Some economists noticed that the change in the value of the U.S. dollar was largely due to the change in interest rates, and the change in interest rates occurred because of the Fed’s use of __________ to further stimulate the economy.
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open market sales
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quantitative easing
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discount operations
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open market purchases
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Question 30

2.5 ??/ 2.5 points
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M1 __________.
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is the sum of currency plus ??traveler’s checks
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is the narrowest definition of the ??money supply
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includes small time deposits
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includes credit cards
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Question 31

2.5 ??/ 2.5 points
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All of the following statements are true of the Federal Reserve EXCEPT __________.
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it acts as the central bank for ??all countries in the world
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along with the Board of ??Governors, the chairperson of the Federal Reserve determines monetary ??policies and strategies based on the state of economy
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it supplies currency to the ??economy
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it holds reserves from banks and ??regulates banks
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Question 32

2.5 / 2.5 points
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An open market __________ by the Fed decreases the money supply, which leads to __________ interest rates and a fall in investment spending.
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sale; increased
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sale; decreased
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purchase; increased
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purchase; decreased
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Question 33

2.5 / 2.5 points
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In the __________ , increases in the supply of money will __________.
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short run; raise total demand and ??output
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long run; raise total demand and ??output
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long run; lead to lower prices
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short run; decrease total demand ??and output
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Question 34

2.5 / 2.5 points
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The group responsible for deciding on monetary policy is the __________.
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Federal Open Market Committee
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Board of Governors only
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Federal Advisory Council
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group of 12 Federal Reserve Bank ??presidents only
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Question 35

2.5 / 2.5 points
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An increase in the reserve requirement __________.
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increases the money supply, which ??leads to increased interest rates and a decrease in GDP
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increases the money supply, which ??leads to decreased interest rates and a decrease in GDP
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decreases the money supply, which ??leads to increased interest rates and a decrease in GDP
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decreases the money supply, which ??leads to decreased interest rates and a decrease in GDP
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Question 36

2.5 / 2.5 points
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Good news for the economy is bad news for bond prices, because __________.
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the increased demand for money ??will increase interest rates
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when real GDP increases, demand ??for money will decrease
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bond prices move in the same ??direction as interest rates
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when interest rates increase ??during growing GDP, bond prices will increase
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Question 37

2.5 / 2.5 points
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A bank may make loans until its __________.
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required reserves are exhausted
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excess reserves are exhausted
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total assets are exhausted
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total liabilities are exhausted
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Question 38

2.5 / 2.5 points
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Based on the model of the money market, if prices in the economy decrease, the equilibrium interest rate should __________.
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stay the same
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increase
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decrease
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increase to the same extent that ??the supply of money increases
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Question 39

2.5 / 2.5 points
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The Federal Reserve influences the level of interest rates in the short run by changing the __________.
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demand for money through open ??market operations
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demand for money through changes ??in reserve requirements
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supply of money through open market ??operations
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supply of money through changes ??in stock market operations
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Question 40

2.5 / 2.5 points
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If money is used as a mechanism to hold purchasing power for a period of time, it is functioning as a __________.
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standard of value
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store of value
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medium of exchange
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unit of account