quiz 2

The _____ was an $825 billion economic stimulus package, passed by Congress, designed to turn the economy by cutting taxes, building infrastructure, and investing in green energy.

American Recovery and Reinvestment Act

In the context of monetary policy, which of the following is a result of an increase in the reserve requirement?

Interest rates begin to rise.

Which of the following statements is true of the Troubled Assets Relief Program (TARP)?

It ended up costing taxpayers far less than expected.

_____ is a market structure with only a handful of competitors selling products that can be similar or different and has high barriers to entry.

Oligopoly

Which of the following is an example of a natural monopoly?

Public utilities

Fiscal strategies are closely tied to political philosophy.

True

Gross Domestic Product (GDP) levels tend to be somewhat understated, since they don't include any illegal activities, which can represent a significant portion of some countries' production.

True

In the context of monetary policy, which of the following statements is true of the discount rate?

When the Fed reduces it, interest rates on bank loans tend to fall.

The Fed directly stimulates spending by:

buying government securities.

The economic system of the East Asian nation of Xinzen calls for public ownership of all businesses. The government has complete control over the market, and individuals do not have individual rights and the freedom to make choices. In this scenario, the economic system followed by Xinzen is _____.

communism

In the context of monetary policy, when the economy contracts, the Fed typically decreases the money supply.

false

The country of Ukanturk has been facing an economic downturn for two consecutive years. To revive the financial condition of the country, its government tries to influence the economy through taxation and spending decisions that are designed to encourage growth and increase employment. In this scenario, the government of Ukanturk is implementing its _____.

fiscal policy

Denver wants to start an industrial products manufacturing company, but he finds it difficult to enter the market as it is already dominated by a single producer who controls product quality and product prices. Given this information, Denver is unable to enter the market because of the existence of _____.

monopoly

Normander Corp. is a large media corporation that owns all the media outlets in Liecheben and a few news agencies internationally. Any new media company that tries to establish itself in Liecheben soon runs out of business because of the overpowering presence of Normander Corp. This scenario exemplifies _____.

monopoly

The Fed:

performs banking services for commercial banks in districts where it operates.

In a business cycle, the _____ is the transition period between contraction and expansion.

recovery

The economy of Sutanvia is under severe financial distress. However, over the last few months, the economy has gradually picked up, and employment levels are slowly rising back to normal levels. Consumers are also beginning to engage in regular buying activities. In this scenario, the economy of Sutanvia is currently in the _____ phase of its business cycle.

recovery

To bring inflation under control, the Fed:

reduces the money supply.

In the context of capitalist economy, the right to free choice directly feeds competition.

true

Identify a true statement about pure market economies.

They do not make sufficient provision for the old, the young, and the sick.

Loger's, a high-end apparel company in Bruslon, an Asian country, cuts back on production as consumers start turning to basic products such as food because of the economic downturn in the country. The company also lays off many of its employees to further cut down expenses. In the context of the business cycle, Bruslon is most likely going through a period of _____.

economic contraction

Irkholm, a South American nation, experiences an economic downturn that leads to an increase in average prices across the country. The situation becomes more serious when average prices increase more than 50% per month. In the given scenario, Irkholm is experiencing _____.

hyperinflation

In its role as the government's bank, the Fed:

keeps the U.S. currency supply in good condition.

The repayment of the debt by the U.S. federal government is likely to result in an increase in:

taxes.

Social security taxes are a source of revenue for the U.S. federal government.

true