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