Econ Chapters 13 & 14

Why did the U.S. government initiate a policy of more frequent intervention during the Great Depression? A. to dominate global trade B. to stabilize the economy C. to prepare for a possible war D. to strengthen local governments

B. to stabilize the economy

When the Federal Open Market Committee decides to use open-market operations, what is it deciding to do? A. adjust the reserve requirement B. deregulate the stock exchanges C. buy or sell government securities D. change the terms for lending to banks

C. buy or sell government securities

Which of these is the best example of fiscal policy? A. deregulate airlines so they have to compete B. lower interest rates so mortgages are cheaper C. create federal jobs so workers can spend more D. insure savings accounts so depositors feel safe

C. create federal jobs so workers can spend more

The market value of all final goods and services produced within a country in a given time period is the A. wage-price spiral. B. consumer price index. C. gross domestic product. D. net of exports minus imports.

C. gross domestic product.

What is the principal economic argument for deficit spending? A. to cut inflation B. to lower the national debt C. to increase overall demand D. to limit the size of government

C. to increase overall demand

Why did Paul Volcker, Federal Reserve chairman during the Carter administration, adopt a tight-money policy? A. to stimulate exports to Japan and Europe B. to promote investment in new technology C. to reduce inflation caused by the oil crisis D. to increase employment in manufacturing

C. to reduce inflation caused by the oil crisis

The official unemployment rate may be overstated because it ignores A. discouraged workers who have given up looking for a job. B. involuntary part-time workers who would prefer to work full time. C. workers in the illegal or informal economy who do not report their jobs. D. parents who do not want jobs because they are caring for young children.

C. workers in the illegal or informal economy who do not report their jobs.

Why is it not fully accurate to describe the national debt as money we owe only to ourselves? A. Government bankruptcy is unlikely. B. Most individuals are in debt as well. C. The debt will have to be paid off in the future. D. About one-quarter of the debt is held by foreigners.

D. About one-quarter of the debt is held by foreigners.

Which condition is considered normal in the United States? A. deflation B. stagflation C. hyperinflation D. creeping inflation

D. creeping inflation

The crowding-out effect occurs when A. a growing national debt transfers the burden to future generations. B. banks with large reserves drive many community banks out of business. C. mandatory spending leaves fewer federal funds for discretionary spending. D. high government borrowing drives up interest rates, making business investment more expensive.

D. high government borrowing drives up interest rates, making business investment more expensive.

A decline in economic activity over a period of at least six months is called a A. contraction. B. depression. C. panic. D. recession.

D. recession.

Keith lost his job at his company's telephone switchboard when the company installed an automated phone system. Which type of unemployment did Keith experience? A. cyclical B. frictional C. seasonal D. structural

D. structural

Which of these has the most responsibility for monetary policy? A. Federal Reserve Board B. United States Congress C. New York Stock Exchange D. Department of the Treasury

A. Federal Reserve Board

One cause of inflation is A. a rise in the cost of production. B. a decrease in consumer demand. C. a tightening of the money supply. D. a growth in the size of inventories.

A. a rise in the cost of production.

The difference between real and nominal GDP is that real GDP is adjusted for A. inflation. B. entitlements. C. unemployment. D. international trade.

A. inflation.

What is the primary goal of supply-side economic policies? A. to stimulate production B. to increase top tax rates C. to slow the multiplier effect D. to fund new federal programs

A. to stimulate production

Why is consumer confidence important to the business cycle? A. Consumers who lack confidence work longer hours, increasing productivity. B. Confident consumers purchase more, increasing business profits and employment. C. Consumers who lack confidence spend recklessly, triggering a speculative bubble. D. Confident consumers are content with what they have, reducing demand and inflation.

B. Confident consumers purchase more, increasing business profits and employment.

Why do fiscal policy measures rarely have an immediate impact on the economy? A. Policies are poorly publicized. B. The multiplier effect takes time. C. People are slow to accept change. D. The misery index can be misleading.

B. The multiplier effect takes time.

Why is the unemployment rate above zero when the economy reaches full employment? A. Most jobs lay off workers when the economy slows. B. There are always some people in transition between jobs. C. There are never enough jobs for everyone who wants one. D. Most workers do not have enough training for the best jobs.

B. There are always some people in transition between jobs.

Business investment is most likely to increase during which phase of the business cycle? A. contraction B. expansion C. peak D. trough

B. expansion