W2-4 Chapter 2 MC Quiz

In response to inflation, the Fed is likely to: a. increase the discount rate. b. subsidize loans. c. increase the debt ceiling. d. buy government securities.

a

In the context of monetary policy, the Fed is most likely to reduce the discount rate during: a. recessions. b. inflations. c. periods of low money supply. d. periods of investment recovery.

a

In the context of monetary policy, which of the following statements is true of the discount rate? a. When the Fed reduces it, interest rates on bank loans tend to fall. b. The Fed increases it during recessions. c. When the Fed increases it, banks can obtain funds at a lower cost. d. It is the interest rate that the Fed charges on its loans to individuals.

a

In the context of open market operations, when inflation is a concern, the Fed sells securities to buyers who write checks to the Fed to pay for securities they bought, and the Fed withdraws these funds from banks. With fewer funds, _____. a. credit becomes tighter b. banks increase the number of loans they make c. banks offer subprime mortgage loans d. the inflationary pressures in the economy heat up

a

In the context of the free market system, which of the following statements is true of oligopoly? a. It typically avoids intense price competition. b. The agriculture industry is an example of oligopoly. c. It has a single producer completely dominating the industry, leaving no room for competitors. d. It is a market structure that has many competitors selling virtually identical products.

a

In the context of the fundamental principles of a free market system, which of the following statements is true of the equilibrium price? a. It refers to the price at the point where the supply curve and the demand curve intersect. b. It is the price at which a seller breaks even. c. It refers to a situation where the cost price of a product is equal to its selling price. d. It is the point at which the final cost of production equals the price of the raw materials used for a product.

a

In the context of the right to private property, identify a true statement about capitalist economy. a. Individuals have the right to will property to family members. b. Businesses are not free to buy property as they see fit. c. Individuals are not free to sell property according to their wishes. d. The government does not impose any restrictions on the right to property.

a

Over the past 30 years, most economies of the world have begun moving toward the market end of a spectrum that ranges from pure planned economy at one extreme to pure market economy at the other. This has led to: a. reduced red tape in socialist governments. b. more investments on human services such as free healthcare and education subsidies. c. stronger centralized government control over businesses.d. a reduction in incentives for both domestic and foreign investment. d. a reduction in incentives for both domestic and foreign investment.

a

Which of the following is a recent advancement in the Western European countries that developed powerful socialist economies in the decades after World War II? a. They have imposed stiff austerity measures to control government spending. b. They have introduced new public benefit programs. c. They are experiencing phenomenal growth. d. They are likely to see an influx of potential entrepreneurs from other countries.

a

In its role as a regulator, the Fed: a. influences the economy through taxation and spending decisions. b. oversees mergers and acquisitions. c. maintains the federal government's checking account. d. coordinates the check-clearing process for checks on behalf of banks.

b

In the context of mixed economies, which of the following statements is true of the U.S. federal government? a. It directly operates firms in the financial sector. b. It is part owner in a number of financial institutions. c. It does not employ a significant number of people.d. It does not own major enterprises. d. It does not own major enterprises.

b

Which of the following factors acts as a motivator for business owners in a capitalist economy? a. Guaranteed profits for privately owned enterprises b. The right to spend after-tax income however one sees fit c. Social and economic equality in society d. Government welfare programs

b

In a business cycle, the _____ is the transition period between contraction and expansion. a. disinflation b. deflation c. recovery d. recession

c

In the context of fiscal policy, which of the following actions by the government helps boost the economy in the long term? a. Providing jobs, such as mail carrier b. Creating deflation in the market every few years c. Investing in public assets, such as a national renewable energy grid d. Artificially creating a budget deficit every few years by withdrawing funds from the market

c

In the context of monetary policy, if the Fed decreases the reserve requirement, _____. a. interest rates will increase b. the availability of credit will decrease c. there will be more loans available d. banks will need to hold more funds

c

In the context of monetary policy, which of the following is a result of an increase in the reserve requirement? a. Banks can no longer hold any funds. b. Credit becomes readily available. c. Interest rates begin to rise. d. Number of bank loans begin to increase.

c

In the context of planned economies, countries that adopted communism in 1900s developed: a. a plethora of choices regarding jobs and buying options. b. transparency at every level of government. c. crippling shortages and surpluses. d. individualism and narcissistic values among people.

c

In the context of supply and demand, which of the following statements is true of the free market system? a. As the supply increases, the price also increases. b. People tend to look for products solely on the basis of quality. c. People tend to buy more products with lower prices. d. As the supply increases, the demand also increases.

c

In the context of the business cycle, which of the following statements is true of the period of economic contraction? a. Businesses start producing more goods to support the economy. b. The economic feel-good factor brings in a lot of investment. c. Consumers shift their buying patterns to more basic products. d. The dropping prices increase the sales of luxury goods and services.

c

In the context of the fundamental rights of capitalism, which of the following statements is true about capitalism? a. It depends on government regulations to drive higher quality and lower prices. b. Businesses are not free to spend after-tax profits however they want. c. It doesn't guarantee that anyone will actually earn profits. d. Businesses are not free to buy, or not buy, according to their wishes.

c

To bring inflation under control, the Fed: a. offers loans to the commercial banks. b. buys government securities. c. reduces the money supply. d. reduces the interest rates.

c

When the Fed sells securities, _____. a. credit becomes readily available b. banks become flush with funds c. banks cut back on the loans d. the money supply increases

c

Which of the following is a feature of capitalism? a. The system works toward improving the lot of the working class at the expense of the super-rich. b. The government owns and operates key enterprises that directly affect public welfare. c. Private-sector businesses are free to make their own choices regarding what they will produce. d. Private-sector businesses are not free to hire and fire at their discretion.

c

Which of the following is a negative factor that interferes with the effectiveness of socialist economic systems? a. Excessive private ownership of healthcare services b. Absence of a tax structure c. Inefficiencies and corruption d. Lack of government ownership of key enterprises

c

Which of the following tools is most frequently used by the Fed to expand and contract the money supply in the economy? a. Steering taxes b. Credit default swaps c. Open market operations d. Endowment mortgages

c

_____ refers to the relationship between the goods and services that an economy generates and the resources needed to generate them. a. Supply curve b. Equilibrium quantity c. Productivity d. Reserve requirement

c

In the context of fundamental principles of a free market system, which of the following statements is true of a supply curve? a. For most goods and services, it slopes downward as it moves to the right. b. It shows the relationship between supply and quantity from a buyer standpoint. c. For most goods and services, it forms a sinusoidal curve. d. It shows the relationship between price and quantity from a supplier standpoint.

d

In the context of monetary policy, when the economy is weak, the Fed: a. asks banks to cut back on the loans they make. b. helps reduce inflationary pressures in the economy. c. withdraws funds from banks. d. buys government securities on the open market.

d

In the context of monetary policy, which of the following is a result of a decrease in the reserve requirement? a. Banks need to hold more funds. b. Interest rates begin to increase. c. Banks make less number of loans. d. The availability of credit increases.

d

In the context of monetary policy, which of the following statements is true of money supply? a. The M1 money supply includes market accounts and certificates of deposit. b. The M2 money supply excludes all of the M1 supply except certificates of deposit. c. The M2 money supply excludes paper bills and metal coins. d. The M1 money supply includes all currency plus checking accounts and traveler's checks.

d

In the context of the free market system , which of the following statements is true of pure competition? a. Competitors sell different products to get an edge. b. Customers distinguish one product from another. c. New producers cannot easily enter the market. d. No single producer has any control over the price.

d

The Fed: a. calculates the expected expenditure for the federal government every year. b. decreases the money supply when the economy contracts. c. outlines expected revenue that is due from the collection of taxes and fees. d. performs banking services for commercial banks in districts where it operates.

d

Which of the following is an example of a natural monopoly? a. Agriculture b. Network television c. The automobile industry d. Public utilities

d