Econ

What does the process of specialization do for an economy? a) It fosters competition. b) It eliminates unemployment. c) It makes it more efficient. d) It makes it easier to control.

c

What incentive do manufacturers have to sell their products? a) popularity of the product b) pleasing the consumer c) making profits on sales d) putting others out of business

c

What leads directly to the crowding-out-effect? a) cuts in federal spending b) increased government spending c) a big federal budget deficit d) a federal budget surplus

c

What type of policy does the Fed use to counteract a contraction? a) fiscal policy b) tight money policy c) easy money policy d) policy lags

c

Which of the following instruments is NOT used by the Federal Reserve to change the money supply? a) the discount rate b) the required reserve ratio c) the federal tax code d) open market operations

c

Which of the following is NOT characteristic of a centrally planned economy? a) The central government owns all land and capital. b) Each person is assigned a job. c) Each collective or factory sets its own goals. d) The central government makes all economic decisions.

c

Which of the following is a condition that most people would NOT expect the safety net of the government to provide for? a) joblessness b) natural disasters c) low income d) injuries

c

Which of these is a contractionary fiscal policy? a) The federal government sends taxpayers up to $300 each in the form of an income tax rebate. b) The sales tax on clothing is lifted for one week before the school year begins. c) The President and Congress pass a new two-cent-per-gallon gasoline tax. d) The federal government builds a new medical research center at a prestigious state university.

c

the seven-member group that oversees the Federal Reserve System

Board of Governors

the research arm of the Federal Reserve

Federal Advisory Council

A country's production possibilities increase because the available workers become more skilled at using a computer. This is an example of growth caused by a) technology b) production opportunity c) global resources d) physical capital

a

A nation's automakers install new robotic machinery to build cars. Now, cars take only a day to make and the factories can produce many more cars than before. This is an example of growth caused by a) technology b) production possibility curves c) land and natural resources d) human capital

a

All of the following are reasons why it is difficult to put balanced fiscal policy into practice EXCEPT a) the need for discretionary spending. b) political pressures for reelection. c) difficulty of coordinating the needs of many different agencies. d) difficulty of predicting future economic performance.

a

An example of a shortage is limited amounts of a) food available because the trucks carrying it are on strike b) food available because few people want to buy it c) labor available because the workers have other jobs d) water available for irrigating a crop because it is used for other crops

a

Any resources that are made by humans and used to create other goods and services are called a)capital b)services c)production d)labor

a

Congress has just passed several bills outlining the federal budget. What is the next step in the budget process? a) The President signs the budget into law or vetoes it and sends it back to Congress. b) The federal budget will be sent to the fifty state legislatures for approval or rejection. c) The Office of Management and Budget will analyze the Congressional budget and chooses to approve or reject it. d) The new budget automatically becomes law.

a

Every hour, the federal government spends about a) $250 million. b) $250 thousand. c) $25 billion. d) $25 million.

a

Households pay firms for goods and services. Firms supply households with goods and services. The purchase and supply of goods and services takes place in the a) product market. b) factor market. c) after market. d) traditional market.

a

How could the Federal Reserve encourage banks to lend out more of their reserves? a) reduce the discount rate b) raise the required amount of reserve c) increase the prime rate d) reduce the money supply

a

Human capital includes a) a taxi driver's knowledge of the city streets b) the machinery used to weave cloth c) the equipment used by a doctor to cure a patient d) the salary paid to an accountant

a

In which of the following lists of mixed economies does the market system dominate? a) United States, United Kingdom, Singapore, Hong Kong b) Cuba, Greece, China, United States c) France, Canada, South Africa, United Kingdom d) Russia, Peru, France, Canada

a

The President has vetoed several appropriations bills. What is the next step in the budget process? a) Congress can vote to override the vetoes or pass new appropriations bills that the President is likely to sign. b) Congress must pass new appropriations bills for the President to sign. c) The Congressional Budget Office may intervene to ensure a budget is passed. d) Federal agencies send requests for money to the Office of Management and Budget

a

The economy of China is in transition. What does this mean? a) The economy is moving from central planning toward a market-based system. b) Individual firms are in the process of being sold to the state. c) Investments are determined by state control instead of by private decision. d) The government rarely interferes in the free market and is highly receptive to foreign investment.

a

The law of increasing costs means that when an economy increases the production of one item a) the opportunity cost goes up b) the production costs will increase also c) the actual cost goes up but the opportunity cost goes down d) the actual cost of making the item goes down

a

The resources used to make all goods and services are the a) factors of production b) opportunity costs c) production trade-offs d) production possibilities

a

What does "lender of last resort" mean with respect to the Federal Reserve? a) It will lend money to a bank in a financial emergency. b) It makes decisions about who a bank can lend money to. c) It decides interest rates for interbank loans. d) It has the power to decide how much money a bank can lend out

a

What effect would an increase in the discount rate have on the money supply? a) It would cause the money supply to contract. b) It would increase the money multiplier. c) It would cause the money supply to expand. d) It would have no effect on the money supply.

a

What is a factory building an example of? a) physical capital b) technology c) an economic trade-off d) human capital

a

What is an important advantage of a free market? a) It offers a wide variety of goods and services. b) It is easy to regulate. c) It does not change unless the government directs it. d) It protects the less fortunate.

a

What is the purpose of competition? a) to act as a regulating force in the marketplace b) to act as a motivating force behind the free market c) to cause buyers to have to be careful about spending their money d) to cause producers to attempt to put each other out of business

a

What is the relationship between interest rates and demand for money? a) As interest rates decrease, demand for money increases. b) As interest rates increase, demand for money increases. c) Interest rates are determined by demand for money. d) Interest rates and demand for money are unrelated.

a

Which of the following does a government provide as part of a safety net for the people? a) unemployment compensation b) regulation of commerce c) a strong military defense d) general elections every four years

a

Which of the following is characteristic of a traditional economy? a) Children tend to have the same jobs as their parents did. b) They are usually based on light industrial production. c) Communities tend to be fast-growing. d) They have a high standard of living.

a

Which statement describes the federal government's fiscal policies in the 1980s? a) Income tax rates were reduced, but spending increased. b) Income tax rates and spending were both increased. c) Income tax rates and spending were both reduced. d) Income tax rates were increased and spending was reduced

a

You are an entrepreneur with an innovative idea for a new business. In which kind of economy would you have the most opportunity to try to achieve success? a) market economy b) command economy c) traditional economy d) economy of scale

a

How well did the Federal Reserve Banks perform during the Great Depression? a) The Great Depression took place before the Federal Reserve System was established b) Individual governors of the Federal Reserve Banks disagreed over policy and were unable to stop the depression. c) The Chair of the Board of Governors made bad decisions and directed the twelve Federal Reserve Banks to act in ways that harmed the economy. d) The Federal Reserve System skillfully guided the United States economy out of the Great Depression

b

How would the economy of Canada be likely to be characterized? a) mixed, but on the side of centrally planned b) mixed, but on the side of free market c) centrally planned d) free market

b

How would you describe an economy that uses its resources to make the greatest possible number of goods and services? a) globally aware b) efficient c) underutilized d) using opportunity cost well

b

Robin buys a newly-issues Treasury bond, Treasury note, and Treasury bill. Which will mature and be repaid by the government LAST? a) Treasury bill b) Treasury bond c) either Treasury bond or Treasury bill d) Treasury note

b

The Office of Management and Budget a) is part of the legislative branch of government. b) is responsible for deciding how much money each government agency receives in the budget. c) is a privately funded agency responsible for overseeing the preparation of the federal budget. d) is the office that has the final power to approve or disapprove of the federal budget proposed by Congress

b

The federal government's Fiscal Year 2015 begins on a) January 1, 2014. b) October 1, 2014. c) December 31, 2014. d) January 1, 2015.

b

What is one of the most important advantages of a free market? a) It is easy to regulate. b) It encourages growth. c) It can change rapidly. d) It protects the less fortunate.

b

What is the opportunity cost of a decision? a) the series of alternative decisions that could have been made b) the most desirable alternative given up for the decision c) the different ways that a different person might have made the decision d) the best possible way the questions could have been decided

b

What will lead DIRECTLY to a government "shut down"? a) Congress and the President are unable to agree on a budget and one branch of government refuses to pass temporary spending measures. b) The President vetoes Congress's appropriations bills. c) Government spending exceeds revenues before the end of the fiscal year. d) Congress fails to override a presidential veto

b

Which of the following is NOT shown on a production possibilities curve? a) the opportunity cost of a decision b) all of the goods and services an economy has the ability to produce c) whether an economy has grown or shrunk d) the efficiency of an economy

b

Which of the following is one way the Federal Reserve Bank serves the government? a) making loans to the government b) selling government securities c) minting coins for the government d) financing state government projects

b

Which of these tools is an example of monetary policy? a) reducing income taxes b) changing reserve requirements c) increasing government spending d) borrowing money through deficit spending

b

An example of contractionary fiscal policy would be a) increasing production of consumer goods. b) cutting taxes. c) decreasing government spending. d) expanding the government's role in regulating private industry

c

Collectives in the Soviet Union were inefficient producers of agricultural products. Why? a) Soviet central planners ignored the farms in favor of factories producing consumer goods. b) Most farmers were poor and had to pay for their own equipment, seeds, and fertilizer out of their own pockets. c) Farm workers had guaranteed incomes, so they had few incentives to produce more or better crops. d) The farms were too small to produce substantial crops.

c

How many Federal Reserve Districts are there? a) 6 b) 9 c) 12 d) 20

c

How quickly can an increase in government spending increase the gross domestic product? a) immediately b) 3 months c) 6 months d) 1 year

c

In what kind of an economy does the government make all the decisions? a) laissez faire b) free enterprise c) centrally planned d) socialist

c

One example of an entrepreneur is a) a writer who is hired by a film studio to adapt a novel into a screenplay b) a lawyer in a high-profile law firm that specializes in business law c) an artist who runs a business painting murals in office buildings and restaurants d) an Olympic ice skater who later decides to join a professional ice show

c

One example of thinking at the margin is a) putting all of your money in a savings account because the interest rates are so high b) deciding to buy a car you don't really like because it is significantly less expensive than the one want c) deciding whether the benefit of working two extra hours per day is worth the sacrifice of study time d) determining whether it is better to spend your savings on a new computer or on a television

c

The most-used instrument for controlling week-to-week changes in the money supply is a) the required reserve ratio. b) the money multiplier. c) open market operations. d) the discount rate.

c

The purpose of the production possibilities graph is to a) enable a country to mobilize to win a war b) keep an economy from having nonproductive workers c) show alternative ways to use an economy's resources d) make it possible to increase a economy's output.

c

What can a decision-making grid do? a) show you every possible consequence of your decision b) show you every possible benefit of your decision c) help you determine some of the opportunity costs for your decision d) tell you the right course of action

c

Which of these is an example of inside lag in monetary policy? a) Corporations respond slowly to increases in interest rates by reducing their planned investment for future years. b) Individual banks ignore a reduction in the required reserve ratio and hold excess reserves. c) Members of the Board of Governors disagree on the state of the economy and refuse to lower the discount rate until several months after a recession has begun. d) The federal government debates a new public works program and ultimately chooses not to spend money on new highways and railroads.

c

Why are all goods and service scarce? a) some goods cost more than others b) some people want to have more goods than others c) all resources are scarce d) some things are needs and others are wants

c

Why do markets exist? a) Markets provide self-sufficient people with public places for the exchange of ideas. b) Markets ensure that government does not intervene in the production of goods and services. c) Markets allow people to buy what they need to consume and sell the specialized goods and services they produce. d) Markets ensure economic equity for all people.

c

Why does even a free market economy need some government intervention? a) so that the government has some control over factor resources b) to make sure that the government can fulfill its needs for military personnel c) to provide for things that the marketplace does not address d) to ensure that the government has the freedom to tax as necessary

c

the process by which banks record whose account gives up money and whose account receives money

check clearing

when the level of federal borrowing makes it more difficult for private businesses to borrow

crowding-out effect

A person believes that real equality can only exist when political equality is coupled with economic equality. This person believes that democratic means should be used to distribute wealth evenly throughout society. This person is a a) communist. b) capitalist. c) authoritarian. d) socialist.

d

An example of expansionary fiscal policy would be a) cutting government spending. b) cutting production of consumer goods. c) cutting prices of consumer goods. d) cutting taxes.

d

The federal budget is put together a) in order to reimburse state governments for costs of federally funded programs. b) to report to Congress on the preceding year's expenditures. c) every other year. d) by Congress and the White House.

d

The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This kind of decision is a a) decision at the margin b) global trade-off c) basic economic decision d) guns or butter issue

d

The lack of which of the following represents a scarcity? a) grapefruit juice because very few people want to buy it b) orange juice because the trucks carrying it are on strike c) enough workers to work at night because the pay is too low d) enough workers to finish two jobs because there's a limited supply of workers

d

The national debt rose during Ronald Reagan's term as President for all of the following reasons EXCEPT a) an unexpected economic downturn. b) tax cuts. c) increased funding for defense spending. d) the costs of running a war

d

The purpose of expansionary fiscal policy is to a) prevent hyperinflation. b) slow the growth of the GDP. c) increase the separation between government and private industry. d) increase output.

d

What incentive motivates a manufacturer to sell a product? a) popularity of the product b) pleasing the consumer c) putting others out of business d) making profits on sales

d

What is the function of an economic system? a) to make sure people are paid for their labor b) to give all producers the same access to consumers c) to make sure all people have equal access to goods d) to produce and distribute goods and services

d

What is the role of the Federal Open Market Committee? a) It collects information about each Federal Reserve District and reports on economic conditions to the Board of Governors. b) Composed of seven members appointed by the President, it oversees the Federal Reserve System. c) It redraws the map of the twelve Federal Reserve Districts every ten years in response to economic changes. d) It makes key decisions about interest rates and the growth of the United States money supply.

d

What is the struggle among various producers for the consumer's business called? a) self-regulation b) socialism c) incentive d) competition

d

What might be a hardship for citizens of a centrally planned economy making a transition to a market-based system? a) Entrepreneurs would have fewer opportunities to start new businesses. b) Only poor quality goods would be available to consumers, because manufacturers focused on quantity, not quality. c) Farmers would have to grow the crops that the government instructed them to. d) Workers would lose job security and guaranteed incomes.

d

When revenues exceed expenditures, a) there is a budget deficit. b) the government must create more money. c) the government is forced to issue more bonds to raise money. d) there is a budget surplus

d

When you buy a United States Savings Bond, you a) donate money for special government projects. b) pay for your child's college education. c) borrow money from a savings and loan association. d) loan money to the government

d

Which of the following is NOT a key economic question? a) What goods and services should be produced? b) Who consumes these goods and services? c) How should these goods and services be produced? d) How should it be ensured that goods and services are paid for?

d

Which of the following is a "guns or butter" decision? a) A school has to decide whether to build a new gym or renovate the auditorium b) A man must decide whether to install an alarm system in his house or buy new furniture for the living room c) A woman has to decide whether to replace her old car with a new sports car or a family sedan d) A country must decide whether to use its steel to build new fighter jets or new sports cars

d

Which of the following was a free market philosopher? a) Vladimir Lenin b) Friedrich Engels c) Karl Marx d) Adam Smith

d

Which of these Presidents increased top marginal income tax rates during his term in office? a) George W. Bush b) John F. Kennedy c) Ronald Reagan d) Franklin D. Roosevelt

d

Which of these situations is most likely to cause the Fed to introduce a tight money supply? a) A recession has reduced aggregate demand and increased unemployment. b) The federal government passes a new budget with a large deficit. c) The economy is prosperous with relatively low inflation and low unemployment. d) The economy is expanding quickly and inflation is a concern

d

Why does the Federal Reserve alter monetary policy? You Answered a) to regulate the banking industry b) to provide services to member banks c) to enable banks to clear checks d) to lessen the effect of natural business cycles

d

a written document indicating the amount of money the government expects to receive for a certain year and authorizing the amount of money the government can spend that year

federal budget

interest rate banks charge each other for loans

federal funds rate

federal government's use of taxing and spending to keep the economy stable

fiscal policy

physical objects that can be exchanged

goods

paid effort that people devote to a task

labor

the process by which money enters into circulation

money creation

total amount of money the federal government owes

national debt

the buying and selling of government securities to alter the supply of money

open market operations

The most desirable alternative given up when people choose one course of action over another

opportunity cost

the time it takes for monetary policy to have an effect

outside lag

rate of interest banks charge on short-term loans to their best customers

prime rate

the fraction of deposits that banks must keep on hand

reserved required ratio

limited quantities of resources to meet unlimited needs or desires

scarcity

actions or activities that one person performs for another

services

a type of short-term bond that must be repaid within a year or less

treasury bill

a type of bond that the issuer may take as long as 30 years to repay

treasury bond

use of fewer resources than the economy is capable of using

underutilization