Econ Final Exam

Using the provided information, what would be the tax responsibility of a steel worker who made $92,000 in 2014? a. $18,935.75 b. $25,760.00 c. $16,285.75 d. $6,856.25

a. $18,935.75

Why are banks susceptible to potential bank runs? a. Banks keep only fractional funds available, a much higher customer demand to withdraw funds in a short period of time may generate customer panic. b. Banks make many conservative loans at high interest rates, but pay low interest rates to depositors. c. Banks have short business hours and customers have difficulty accessing their funds after hours.

a. Banks keep only fractional funds available, a much higher customer demand to withdraw funds in a short period of time may generate customer panic

Moral hazard is associated with which of the following Federal Reserve bank functions? a. Lender of last resort b. FDIC c. Open market operations

a. Lender of last resort

In the country of Ovriolio the government has a budget plan to collect taxes in the amount of $15 billion and to spend $12 billion. A surge in production boosts the economy and the government spends $2 billion less than planned and tax collection is up by $1 billion. What are the results of these actions? a. Ovriolio's expected budget surplus becomes a $6 billion surplus. b. Ovriolio's expected budget surplus becomes a $6 billion deficit. c. Ovriolio's expected budget surplus becomes a $3 billion deficit.

a. Ovriolio's expected budget surplus becomes a $6 billion surplus.

The mission of the Federal Reserve Bank fits best with which of these statements? a. The Fed is the banking industry's private bank. b. The Fed is to be the government's private bank. c. The Fed is to be a profit generating center.

a. The Fed is the banking industry's private bank.

Which of the following accurately describes the banking system? a. They put a fraction of their deposits in reserves and then loan out or invest the rest. b. They put a majority of their deposits into safes and then loan out or invest the rest. c. They serve to hold the deposits of individuals and businesses, but can gradually accumulate interest on deposits by loaning a small portion.

a. They put a fraction of their deposits in reserves and then loan out or invest the rest.

Tom earns $33,000 per year. The income tax rate on incomes below $20,000 is 10 percent. The rate on income between $20,001 and $35,000 is 15 percent. Which of the following is true? a. Tom's marginal income tax rate is 15 percent. b. The income tax is regressive. c. The income tax is flat.

a. Tom's marginal income tax rate is 15 percent.

In the 1980s the U.S. Central Bank had the goal of increasing the interest rate and decreasing the money supply. To implement its goal the Central Bank uses a ________ monetary policy. a. contractionary b. expansionary c. relaxed

a. contractionary

In an attempt to boost the economy, the government's expansionary fiscal policy would include which of the following? a. cutting tax rates b. cutting government expenditure c. increased taxation d. reducing the money supply

a. cutting tax rates

After 2008, quantitative easing was distinctively different from traditional central bank intervention because it focused on a. encourage long-term capital projects and ease mortgage conditions by purchasing long-term government securities. b. restoring the private sectors credit by purchasing "toxic assets". c. encouraging investment by raising private bank's revenues.

a. encourage long-term capital projects and ease mortgage conditions by purchasing long-term government securities.

Property taxes are a. imposed based on ownership of assets such as real estate and autos. b. generally considered to be regressive. c. generally considered to be flat.

a. imposed based on ownership of assets such as real estate and autos.

Contractionary fiscal policy is recommended when a. inflation has reached harmful levels. b. unemployment is on the rise. c. a recession has taken place.

a. inflation has reached harmful levels.

The discount rate is: a. interest rate charged by the Federal Reserve for discount loans. b. the interest on overnight inter-bank loans. c. interest rate that banks charge their very best corporate customers.

a. interest rate charged by the Federal Reserve for discount loans.

Corporate stock ________. a. represents ownership in a firm. b. is considered to be a loan from a bank. c. represents debt in a firm.

a. represents ownership in a firm.

If the Fed wants to decrease the quantity of money in the economy, it can a. sell bonds. b. buy bunds. c. lower the reserve requirement.

a. sell bonds.

When the central bank lowers the reserve requirement on deposits a. the money supply increases and interest rates decrease. b. the money supply and interest rates decrease. c. the money supply decreases and interest rates increase.

a. the money supply increases and interest rates decrease.

Fiat money is backed by a. the public's trust that it can be exchanged for goods and services. b. bartering arrangements. c. precious metals such as gold.

a. the public's trust that it can be exchanged for goods and services.

Which of the following is considered a Federal Reserve monetary policy tool? a. varying the discount rate b. setting household deposit requirements c. printing money

a. varying the discount rate

The required reserve ratio for Julie's bank is 10 percent. If Julie deposits $5,000 cash into her checking account, what amount of new money could the bank create when it lends out its excess reserves? a. $500 b. $4,500 c. $2,500

b. $4,500

If the reserve requirement is 10 percent and a monetary expansion increases excess reserves by $10 million, the total change in the money supply after all rounds of lending are completed is ________. a. 50 million b. 100 million c. 5 million

b. 100 million

Which process is used by banks to create money? a. Banks printing money. b. Banks lend money and collect interest on the loans. c. Banks using bank deposits to pay expenses.

b. Banks lend money and collect interest on the loans.

________ is defined as goods are exchanged directly for other goods. a. Commodity b. Barter c. Currency

b. Barter

What is the definition of credit? a. Credit is a means of purchasing items in smaller sums over a longer period of time. b. Credit is a way to purchase goods or services now when you cannot afford to pay for it all at once with cash. c. Credit is a means of purchasing services using a debit card.

b. Credit is a way to purchase goods or services now when you cannot afford to pay for it all at once with cash.

Which of the following examples describe a progressive tax? a. Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn. b. Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households. c. Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000.

b. Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.

Which of the following scenarios would be MOST beneficial to a bank? a. Carly and Jude decide to withdraw more cash from the bank each month to pay for all of their purchases in cash. b. Kim and Micah decide to move most of their money from a checking account into a savings account. c. Jarrell and Chloe decide to deposit money in the bank and pay for everything using their debit card.

b. Kim and Micah decide to move most of their money from a checking account into a savings account.

Which source of money is most liquid, or available for consumers to use? a. Certificates of deposit b. M1 c. M2

b. M1

Which of the following are major components of US federal government spending? a. Foreign aid b. Medicare and social security expenditures c. Education

b. Medicare and social security expenditures

Which of the following example(s) describe a proportional tax? a. Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000. b. Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn. c. Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.

b. Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn.

If Congress wanted to implement a tax cut during a recession but had to keep a balanced budget, what would need to do? a. The government would have to increase spending. b. The government would have to reduce spending. c. The government would have to cut taxes in another area.

b. The government would have to reduce spending.

Money creation in the United States results from which of the following? a. The rise in the value of gold. b. The process of multiple banks' lending out deposits. c. The purchases of government securities.

b. The process of multiple banks' lending out deposits.

Which of the following is NOT an example of an expansionary, discretionary fiscal policy? a. a reduction in tax rates. b. an increase in tax rates. c. an increase in government purchases d. an increase in transfer payments.

b. an increase in tax rates.

Cigarettes can be used as a form of ________. a. fiat money b. barter c. fake money

b. barter

An open market operation decreases the money supply when the Federal Reserve a. sells bonds to banks, which increases bank reserves. b. buys bonds from banks, which decreases bank reserves. c. buys bonds from banks, which increases bank reserves

b. buys bonds from banks, which decreases bank reserves.

Equilibrium in financial markets occurs at an interest rate where the quantity of loanable funds demanded is a. less than the quantity of loanable funds supplied. b. equal to the quantity of loanable funds supplied. c. greater than the quantity of loanable funds supplied.

b. equal to the quantity of loanable funds supplied.

Of the following examples of securities, which example is excluded from being a security? a. equities b. fiat money c. bonds

b. fiat money

All else being equal, how does an increase in the federal funds rate affect home loan rates? a. home loan rates remain the same b. home loan rates rise c. home loan rates fall

b. home loan rates rise

The ability to pay principle of taxation holds that a. taxes should be a flat rate regardless of income. b. people with more income should pay more taxes. c. people who receive more of the benefit of government spending should pay more taxes.

b. people with more income should pay more taxes.

The M2 measure of the money supply is defined as currency a. plus savings accounts and other timed deposits, CDs and money market funds, and is smaller in sum than M1. b. plus savings accounts and other timed deposits, CDs and money market funds, and is larger in sum than M1. c. minus savings accounts and other timed deposits, CDs and money market funds, and is larger in sum than M1.

b. plus savings accounts and other timed deposits, CDs and money market funds, and is larger in sum than M1.

If the Fed ultimately wants to raise interest rates in the economy, then it should a. raise the federal funds rate. b. raise the discount rate. c. lower the discount rate.

b. raise the discount rate.

The Federal Reserve's monetary policies include changes in a. tax rates. b. reserve requirements. c. government spending.

b. reserve requirements.

When the supply of loanable funds shifts its position to the left, interest rates will ________ because loanable funds will be ________. a. fall; less scarce b. rise; more scare c. rise; less scarce

b. rise; more scare

Of the examples below, which is an example of debt? a. amazon gift card b. student loan c. debit card

b. student loan

In financial markets one of the main economics principles present is________. a. nominal decision making b. supply and demand c. a command economy

b. supply and demand

Which economics principle is present in financial markets? a. rational decision making b. supply and demand c. conspicuous consumption

b. supply and demand

Ultimately, FDIC ensures that ________. a. there will always be sufficient consumption to maintain a stable economy b. there will always be sufficient loanable funds for investors to tap for economic growth generating activities c. the government can minimize its obligations to savers

b. there will always be sufficient loanable funds for investors to tap for economic growth generating activities

All over the globe commodities (e.g. corn, wheat, beans) are priced in United States dollars. This in economic terms, is an example of a. You Answered store of value. b. units of account. c. flexible values.

b. units of account.

The required reserve ratio for Jack's bank is 10 percent. If Jack deposits $2,000 cash in his checking account, what is the amount of new money the bank would create when it lends out its excess reserves? a. $1,000 b. $200 c. $1,800

c. $1,800

Tad just filled his truck with gas, grabbed a pack of cigarettes and a case of beer on his way to his fishing cabin. When looking at his receipts, what does Tad notice that all three of these goods have in common? a. Each have an imposed regressive tax. b. Each of them have imposed on them a proportional tax. c. All of them are subject to government excise taxes.

c. All of them are subject to government excise taxes.

Which of the following is a concern of fiscal policy? a. Changes in the money supply. b. Changes in interest rates. c. Changes in taxes.

c. Changes in taxes.

Google runs a lucrative business and will pay corporate income tax to the federal government. On what is the corporate tax based? a. A proportional tax rate for Google. b. A progressive tax rate for Google. c. Google's profits.

c. Google's profits.

Which of the following statements about quantitative easing describes it best? a. Quantitative easing means encouraging government agencies to maintain income maintenance programs through improving credit conditions. b. Quantitative easing means fostering private household consumption. c. Quantitative easing means encouraging private firms to increase capital expansion projects through improving credit conditions.

c. Quantitative easing means encouraging private firms to increase capital expansion projects through improving credit conditions.

Assuming that income tax is the only source of revenue for the government, with tax revenue of $50 billion and government spending totaling $70 billion, which of the following is true of the government's budget? a. The government has a balanced budget of $70 billion. b. The government has a budget surplus of $20 billion. c. The government has a budget deficit of $20 billion.

c. The government has a budget deficit of $20 billion.

Say that Fed policy requires all banks to hold 8% of deposits in reserves. If Ventura Bank does not hold any excess reserves and the Fed increases the reserve requirement to 10%, what will be the result? a. An increase in Ventura Bank's net worth. b. An increase Ventura Bank's ability to make loans. c. The money supply in the economy decreases.

c. The money supply in the economy decreases.

When does a balanced budget occur? a. When the rate of increase in government spending equals the rate of increase in government tax revenue collections. b. When government spending exceeds government tax revenues. c. When government spending equals government tax revenues.

c. When government spending equals government tax revenues.

How do central bank policies affect interest rates? a. When the central bank decides to increase the discount rate, interest rates will initially increase, and then decrease in the long run. b. When the central bank decides to decrease the discount rate, then interest rates Increase. c. When the central bank decides to increase the discount rate, then interest rates increase.

c. When the central bank decides to increase the discount rate, then interest rates increase.

State and local government spending goes predominantly towards a. Social Security. b. national defense. c. education.

c. education.

What is money called if it has no significant non-monetary value? a. intrinsic value money b. commodity money c. fiat money

c. fiat money

Sales taxes are a. generally considered to be progressive. b. a tax burden that is entirely paid by consumers. c. imposed as a percentage of the value of the purchase.

c. imposed as a percentage of the value of the purchase.

The equilibrium interest rate is the a. highest interest rate that borrowers are willing to pay on their loans. b. lowest interest rate at which lenders are willing to supply financial capital. c. interest rate at which the quantity of borrowed money equals the quantity of financial capital supplied.

c. interest rate at which the quantity of borrowed money equals the quantity of financial capital supplied.

If the public and community loses trust in banks it affects the entire U.S. financial system. In order to keep this type of financial contagion from happening, the Fed a. guides and regulates private deposit insurance programs to cover insolvent bank losses. b. decreases the money supply as acting lender of last resort. c. makes as needed short-term emergency loans, by acting as the lender of last resort.

c. makes as needed short-term emergency loans, by acting as the lender of last resort.

An interest rate is the ________ and the reward for lending money. a. annual stock dividend b. total price of a purchase c. price of borrowing money

c. price of borrowing money

An open market sale of US Treasury bonds by the central bank will ________ credit conditions for private firms. a. not change b. ease c. restrict

c. restrict

If the Fed raises reserves requirements, then interest rates will ________ and the money supply will ________. a. fall; increase b. be unaffected; decrease c. rise; decrease

c. rise; decrease

When the central bank decides it will sell bonds using open market operations: a. interest rates decrease. b. the money supply increases. c. the money supply decreases.

c. the money supply decreases.

Around the world oil is priced consistently in United States dollars. In economic terms this is an example of: a. store of value. b. flexible values. c. units of account.

c. units of account.

Which of the following is an example of an automatic fiscal policy stabilizer? a. Tax revenues rise after Congress raises corporate tax rates. b. Congress cuts individual income tax rates. c. Congress decides to cut spending on national defense. d. Tax revenues fall as real GDP decreases.

d. Tax revenues fall as real GDP decreases.

Which of the following is NOT an important role of the Federal Reserve? a. regulate the supply of money in the country b. affect interest rates c. attempt to keep the economy stable d. oversee macroeconomic policies outside the U.S.

d. oversee macroeconomic policies outside the U.S.