Lesson 4
Question 1 2.5 / 2.5 points
If government increases spending and wants to maintain a balanced budget, it should __________.
decrease taxes by an equal amount
increase taxes by an equal amount
decrease taxes by an amount equal to the increase in spending multiplied by the tax multiplier
increase taxes by an amount equal to the increase in spending multiplied by the tax multiplier
Question 2 2.5 / 2.5 points
Higher real interest rates resulting from a government budget deficit will __________ the amount of loanable funds a firm demands for their investments.
stabilize
decrease
not affect
increase
Question 3 0 / 2.5 points
Which of the following is NOT a key financial institution?
insurance companies
stock markets
commercial banks
government-sponsored mortgage lenders
Question 4 2.5 / 2.5 points
What was one of the biggest contributing factors that led to the failure of financial institutions during the recent economic crisis?
low interest rates
high employment rates
rising home prices
strong corporate management
Question 5 2.5 / 2.5 points
If a firm increases its capital stock per person while holding constant the number of workers employed, the firm is said to experience __________.
capital augmentation
investment deepening
labor intensity
capital deepening
Question 6 2.5 / 2.5 points
Nations that borrow from abroad to support current investment will __________.
always be better off in the future
always sacrifice future consumption
be better off in the future if the investments are profitable
sacrifice future consumption only if the investments are profitable
Question 7 2.5 / 2.5 points
According to the text, __________ is perhaps the most critical aspect of a country's economic performance.
growth in GDP
the inflation rate
the unemployment rate
the living standard
Question 8 2.5 / 2.5 points
In developing countries, the highest returns are from investing in __________.
transportation systems
sanitation systems
education
defense
Question 9 2.5 / 2.5 points
Nations with low levels of GDP per capita may converge to richer nations if __________.
Question 10 2.5 / 2.5 points
An increase in the capital stock will __________.
shift the production function downward
shift the production function upward
flatten the production function
steepen the production function
Question 11 2.5 / 2.5 points
What happens to U.S. GDP when foreign countries experience prosperity?
Question 12 2.5 / 2.5 points
The multiplier that arises from equal increases in government spending and taxes is called the __________.
simple multiplier
tax multiplier
balanced budget multiplier
government spending multiplier
Question 13 2.5 / 2.5 points
Convergence refers to closing the gap in __________ between poorer countries and richer countries.
real GDP
real GDP per capita
the growth rate in real GDP
the growth rate in real GDP per capita
Question 14 2.5 / 2.5 points
Which of the following uses of tax revenues collected by the government leads to increased capital deepening?
building roads
increased foreign aid
Medicare payments
Social Security payments
Question 15 2.5 / 2.5 points
The fraction of additional income spent on imports is called the __________.
import function
marginal propensity to import
marginal propensity to export
trade balance
Question 16 2.5 / 2.5 points
Economic growth is severely impeded in economies __________.
with a lack of clear property rights
with a strong market system
with high rates of convergence
which encourage induced innovation
Question 17 2.5 / 2.5 points
According to the method of growth accounting, which of the following contribute to economic growth?
capital growth
labor growth
technological progress
all of the above
Question 18 0 / 2.5 points
Fluctuations in the demand and supply of loanable funds will in turn bring changes to the __________ of lent and borrowed funds.
product recipient
mortgage-backed securities
equilibrium quantity
equilibrium quality
Question 19 2.5 / 2.5 points
Suppose that for a given firm, the increase in output resulting from the last worker hired is less than the increase in output of the previous worker hired. This is an example of __________.
diminishing returns
constant returns
increasing return
capital deepening
Question 20 2.5 / 2.5 points
If the government __________ taxes to pay for spending on infrastructure, the result will most likely be a(n. __________ in capital deepening.
increases; increase
decreases; increase
increases; decrease
eliminates; elimination
Lesson 5
Question 21 2.5 / 2.5 points
Equilibrium in the money market occurs when __________.
Question 22 2.5 / 2.5 points
The Federal Reserve System was created by the __________.
U.S. Treasury
President
Congress
Supreme Court
Question 23 2.5 / 2.5 points
What impact does the Fed's raising the interest rate have on the money supply and on the price level?
Question 24 2.5 / 2.5 points
Loans are examples of a bank's __________.
assets
liabilities
net worth
balance sheet
Question 25 2.5 / 2.5 points
One of the essential functions that a bank performs is __________.
purchasing government bonds
creating deposits by lending required reserves
transferring money from savers to lenders
owning assets like real estate
Question 26 0 / 2.5 points
By law, banks are required to __________.
hold 100 percent of customer deposits as reserves
hold a fraction of their reserves at the Federal Reserve bank
hold a fraction of demand deposits as reserves
lend out no more than the amount of their required reserves
Question 27 2.5 / 2.5 points
When checks are exchanged between banks, the Fed oversees the banks to ensure the appropriate funds have been transferred. This is known as __________.
check kiting
check clearing
check floating
check balancing
Question 28 2.5 / 2.5 points
The supply of money in the U.S. economy is determined primarily by __________.
Question 29 2.5 / 2.5 points
Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to answer the following two question(s..
open market sales
quantitative easing
discount operations
open market purchases
Question 30 2.5 / 2.5 points
M1 __________.
is the sum of currency plus traveler's checks
is the narrowest definition of the money supply
includes small time deposits
includes credit cards
Question 31 2.5 / 2.5 points
All of the following statements are true of the Federal Reserve EXCEPT __________.
it acts as the central bank for all countries in the world
along with the Board of Governors, the chairperson of the Federal Reserve determines monetary policies and strategies based on the state of economy
it supplies currency to the economy
it holds reserves from banks and regulates banks
Question 32 2.5 / 2.5 points
An open market __________ by the Fed decreases the money supply, which leads to __________ interest rates and a fall in investment spending.
sale; increased
sale; decreased
purchase; increased
purchase; decreased
Question 33 2.5 / 2.5 points
In the __________ , increases in the supply of money will __________.
short run; raise total demand and output
long run; raise total demand and output
long run; lead to lower prices
short run; decrease total demand and output
Question 34 2.5 / 2.5 points
The group responsible for deciding on monetary policy is the __________.
Federal Open Market Committee
Board of Governors only
Federal Advisory Council
group of 12 Federal Reserve Bank presidents only
Question 35 2.5 / 2.5 points
An increase in the reserve requirement __________.
increases the money supply, which leads to increased interest rates and a decrease in GDP
increases the money supply, which leads to decreased interest rates and a decrease in GDP
decreases the money supply, which leads to increased interest rates and a decrease in GDP
decreases the money supply, which leads to decreased interest rates and a decrease in GDP
Question 36 2.5 / 2.5 points
Good news for the economy is bad news for bond prices, because __________.
the increased demand for money will increase interest rates
when real GDP increases, demand for money will decrease
bond prices move in the same direction as interest rates
when interest rates increase during growing GDP, bond prices will increase
Question 37 2.5 / 2.5 points
A bank may make loans until its __________.
required reserves are exhausted
excess reserves are exhausted
total assets are exhausted
total liabilities are exhausted
Question 38 2.5 / 2.5 points
Based on the model of the money market, if prices in the economy decrease, the equilibrium interest rate should __________.
stay the same
increase
decrease
increase to the same extent that the supply of money increases
Question 39 2.5 / 2.5 points
The Federal Reserve influences the level of interest rates in the short run by changing the __________.
Question 40 2.5 / 2.5 points
If money is used as a mechanism to hold purchasing power for a period of time, it is functioning as a __________.
standard of value
store of value
medium of exchange
unit of account
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