Economics Semester Test Review
The RR is 10%; the Fed buys $10 million of government securities from the public. The MS is increased by $_________. Possible money creation in the banking system is $__________
$10 mil, $90 mil
The RR is 40% and the Econ Bank (with no ER) borrows $100 million from the Fed. The Econ Bank can loan out how much money?
$100 million
Suppose the Keynes Bank has ER of $25,000 & DD of $200,000, if RR is 50% the size of the bank's TR are $___________
$125,000
If the RR is 25% & the Fed buys $200 million of securities from the public. The MS is increased by $__________. Possible money creation in the banking system is $____________
$200 million, $600 million
If unemployment is 18% & normal GDP is $100 billion, what is the output (GDP) being foregone?
$24 billion
Suppose the XYZ bank has an ER of $6,000 & DD of $80,000. If the RR is 25%, what is the size of the bank's actual reserves?
$26,000
If the nominal GDP is $100 billion but unemployment is 8%, then the GDP output gap being foregone is:
$4 billion
The RR is 40% and the Econ bank (with no ER) borrows $100 million from the Fed. Both potential money creation in the banking system and the potential TMS are $__________
$40 million
The Fed is divided into:
12 districts
If unemployment is 18%, how much is cyclical (real) unemployment?
12%
The seven Board of Governors serve for:
14 years
For each dollar we ear, a FICA (Social Security) tax rate of ______% is taken out if we are no self employed
7.65%
At what point can you get the most capital goods?
A
At what point would there be the most economic growth in the future if a country were producing there now?
A
Flow #2
A - Consumer spending
Which of the following will NOT cause a "change in demand" for snickers?
A change in he price for snickers
Which of the following best describes the cause-effect chain of an easy money policy
An increase in the MS will lower the interest rate, increase investment spending, & increase GDP
Flow #3
B - Firms make payments (rent, wages, interest, & profits)
Refer to the above graphs. Which of the diagrams illustrate the effects of a decrease in the price of coke upon the demand of Pepsi?
B only
Refer to the above graphs. Which of the diagrams illustrate the effects of an increase in incomes upon the market for second hand clothing?
B only
A certificate of indebtedness (I.O.U) is called:
Bond
At what point is spending for consumer goods the greatest?
C
In the circular flow model, choose an answer from the right column that goes with the proper flow. Flow #1
C - Products (goods/ services) are sold
Refer to the above graphs. Which of the diagrams illustrate the effects of an increase in wages for steel workers?
C only
If there is a movement from "B" to "C", what is given up?
Capital goods
Assume the RR is 25% & the Obama Bank borrows $10,000 from the Fed. As a result:
Commercial bank reserves are increased by $10,000
A government-kept record of increases & decreases in prices is the
Consumer inflation index
The form of business organization that can contain the greatest management skill is:
Corporation
Each of the following is characteristic of bartering EXCEPT:
Currency, checks, & near money as preferred
Unemployment resulting from economic downturns is called:
Cyclical unemployment
What point represents a recession?
D
Flow #4
D - Households sell resources (land, labor, capital, and entrepreneurial ability)
Refer to the above graphs. Which of the diagrams illustrate the effects of a government subsidy for AIDS research being taken away?
D only
A decrease in income, if "X" is a normal good, will:
Decrease demand, decrease price, & decrease quantity
An increase in the prices of resources used to produce VCR's will:
Decrease supply, increase price, & decrease quantity
If a product had inelastic demand, as the price increases then the...
Demand will remain approximately the same
A situation where there is very high unemployment & very low business output for a long time (3 yrs) is:
Depression
All the following are functions (roles) of money EXCEPT:
Durability
What point represents an advance in technology?
E
To stimulate the economy during a recession, the Fed would likely adopt an
Easy-money policy
A new football league would move the supply curve (more football games) to the left
False
Managing the economy by decreasing government spending & increasing taxes ("G" & "T") is an example of:
Fiscal policy
Which of the following is the best example of an opportunity cost?
Giving up movies & hamburgers for 6 months to buy a stereo
Economists use there circular flow model to show:
How resources, products, and money payments are exchanged in the U.S.
An increase in the tastes and preferences for snickers will:
Increase demand, increase price, & increase quantity
An improvement in the technology used to produce steel will:
Increase supply, decrease price, & increase quantity
When a product is a necessity, has few acceptable substitutes, or is relatively inexpensive, then the product is said to have:
Inelastic
The relationship. between QD & price is ______ & the relationship between QS & price is ______.
Inverse, Direct
All the following are factors of production except:
Investments
An advantage of a corporation form of ownership is that
Liability is limited
A sole partnership is characterized by:
Limited size
Demand deposits are included in:
M1, M2, & M3
If a person writes a check on a Dallas bank to purchase a new Camry, he is employing money as:
Medium of exchange
The Fed's managing the economy by reducing the discount rates an example of:
Monetary policy
All the things in nature that can be used to produce goods and services are called:
Natural resources
When consumers have an optimistic outlook about the future and the economy hits a high point, the business cycle is probably in the phase called:
Peak
Members of the Federal Reserve Board of governors are appointed by:
President of the U.S.
The interest rate that commercial banks charge their best customers for loans:
Prime lending rate
The individual income tax in the U.S. is an example of:
Progressive tax
A tax that takes the same percent from all income groups is:
Proportional
The tax on cigarettes or gasoline is an example of what kind of tax?
Regressive
Which type of tax falls most heavily on families with low incomes?
Sales (regressive)
A surplus of unsold "Bugle Boy Jeans" will normally occur when the
Seller of "Bugle Boy Jeans" asks a price that is higher than the jean market price
The national debt exist because the federal government:
Spends more money than it collects in taxes
The federal government uses fiscal & monetary policy to:
Stabilize the economy
A certificate of ownership in a corporation is called:
Stock
Unemployment the results when a worker is replaced by a robot is called:
Structural unemployment
When the commercial banking system borrows from the Fed:
The DD of commercial banks are unchanged, but their reserves increase
When the RR is increased (say, from 10% to 20%):
The ER of member banks are reduced
According to the "Law of diminishing marginal utility"
The last item consumed will be less satisfying than the one before
A disadvantage of a partnership form of business ownership is
The life of the partnership
The supply curve would shift to the right if:
The technology of production improved
Deposits in a bank which cannot be withdrawn be check & earn higher interest are:
Time deposits
A decrease in taxes would shift the supply curve to the right & a decrease in subsidies would shift the supply cure left
True
Opportunity cost is defined by economists as:
What is given up when a choice is made
Which of the following is not one of the basic economic questions?
Where shall goods & services be produced?
Alexandra wants to play soccer and also work at McDonald's. She cannot do both so she decides to play soccer. What is her opportunity cost?
Working at McDonald's
These taxes have your name on them and cannot be transferred to others
ability-to-pay
In a serious recession, the MS should be ______ & interest rates _______
increased / decreased
An increase in the price of wheat would shift the supply curve for corn to the:
left
Banks create money when they:
make loans
Inflation that results from an increase in labor cos is called:
cost-push inflation
Inflation that results from to many dollars chasing too few goods is called:
demand-pull inflation