point A. point B. point C. no point in the graph. 10 points QUESTION 3 A budget
ID: 1209255 • Letter: P
Question
point A.
point B.
point C.
no point in the graph.
10 points
QUESTION 3
A budget deficit is defined as:
a shortfall of revenues compared to expenditures.
a shortfall of expenditures compared to revenue.
accumulated deficits minus accumulated surpluses.
accumulated surpluses minus accumulated deficits.
10 points
QUESTION 4
A business is likely a sole proprietorship if:
it has two or more owners, with each owner liable for every other owner's actions.
it has only one owner who has unlimited liability.
it is legally treated as a person and owned by stockholders who are liable for the actions of the corporate "person."
multiple owners are liable only to the extent of their own investment.
10 points
QUESTION 5
A company borrows money to supplement its current funds and uses it to buy more financial assets. This is what referred to as:
diversification.
leverage.
quantitative easing.
herding.
10 points
QUESTION 6
A fiscal policy that increases government spending or cuts taxes is most appropriate when the economy is in:
a recessionary gap.
an inflationary gap.
a short-run equilibrium.
a long-run equilibrium.
10 points
QUESTION 7
A recessionary gap exists when:
aggregate demand exceeds output.
actual output exceeds potential output.
output exceeds aggregate demand.
potential output exceeds actual output.
10 points
QUESTION 8
A resource is said to have a comparative advantage if:
it is better suited to the production of one good than to the production of an alternative good.
it is equally suited to the production of all goods.
its suitability to the production of one good changes as it produces more of that good.
its suitability to the production of one good does not change as it produces more of that good.
10 points
QUESTION 9
A tariff is:
a tax that government places on imported goods.
a quantity limitation placed on imports
an all-out restriction on imports.
a government-imposed procedural rule limiting imports.
10 points
QUESTION 10
According to Say's Law, people:
supply goods in order to obtain other goods.
supply goods in order to accumulate profits.
demand goods in order to maximize their welfare.
demand goods so they can supply them to others.
10 points
QUESTION 11
According to new growth theory, the primary source of growth is:
entrepreneurship.
government intervention in the market place.
technology.
capital.
10 points
QUESTION 12
According to the law of demand, an increase in the price of baseball trading cards causes:
people to buy fewer trading cards.
people to buy more trading cards.
the scarcity of baseball trading cards to increase.
baseball trading cards to grow in abundance.
10 points
QUESTION 13
An inflationary gap exists when:
aggregate demand exceeds output.
actual output exceeds potential output.
output exceeds aggregate demand.
potential output exceeds actual output.
10 points
QUESTION 14
Any economic system:
can eliminate scarcity.
addresses the questions what is produced, how it is produced, and for whom it is produced.
provides all the goods people want and desire.
provides equal distribution of well-being among its participants.
10 points
QUESTION 15
At a Chicago Bulls game 20,000 tickets were sold at $30 apiece. The game was sold out and some people did not get tickets. This suggests that the selling price:
was at equilibrium.
was below equilibrium.
was above equilibrium.
could not have been any higher.
10 points
QUESTION 16
Certificates of ownership of a company are called:
financial liabilities.
limited liabilities.
profits.
stocks.
10 points
QUESTION 17
Classicals:
generally favor activist government policies.
generally favor laissez-faire policies.
believe that frictional unemployment does not exist.
believe that all unemployment is cyclical unemployment.
10 points
QUESTION 18
Debt service refers to:
how much debt a country incurs each year.
the interest rate a country pays on its debt.
the fraction of a country's debt that becomes due each year.
the interest payments a country makes on its debt each year.
10 points
QUESTION 19
During the business cycle, an economic expansion occurs:
at the peak of the business cycle.
at the trough of a business cycle.
in between the peak and trough.
in between the trough and peak.
10 points
QUESTION 20
Fiscal policies are policies that directly affect:
interest rates.
government spending and taxes.
the money supply.
the price level.
10 points
QUESTION 21
For a given benefit, a rational person chooses the option that has:
the lowest opportunity cost.
the highest opportunity cost.
the average opportunity cost.
no opportunity cost.
10 points
QUESTION 22
For the purposes of calculating GDP, gross private domestic investment includes:
the value of new residential construction.
purchases of stock.
purchases of old automobiles.
purchases of government bonds.
10 points
QUESTION 23
GDP is the:
market value of an economy's production of final goods and services in a one year period.
sum of coins, bills, and demand deposits circulating in an economy one year period.
total expenditures of the federal government over the period of one year.
market value of an economy's production of all goods and services in a one year period.
10 points
QUESTION 24
How many regional banks are in the Federal Reserve System?
6
8
12
15
10 points
QUESTION 25
If nominal GDP is $14 trillion and real GDP is $12 trillion, the GDP deflator is:
86.
117.
112.
114.
10 points
QUESTION 26
If the Fed simultaneously raises the discount rate and the reserve requirement, the money supply will:
contract.
remain unchanged.
expand.
take on a value that cannot be determined from the information given.
10 points
QUESTION 27
If the federal funds rate is above the Fed's target range the Fed should:
follow expansionary policy.
follow contractionary policy.
print money.
do nothing.
10 points
QUESTION 28
If the reserve ratio is 0.08, the money multiplier is:
1.0.
8.0.
10.5.
12.5.
10 points
QUESTION 29
If the reserve requirement is 0.1, the money multiplier will be:
1.
10.
100.
1,000.
10 points
QUESTION 30
In September 2010, the NBER's Business Cycle Dating Committee decided that the recession that began in December of 2007 had ended in July of 2009. The NBER does not use a popular definition of recession—two quarters of falling GDP—but looks at a variety of monthly statistics to date business cycles.
Read the paragraph shown. In July 2009 a recession ended. In business cycle terminology, what does July 2009 mark?
The trough of the cycle
The peak of the recession
The depression of the cycle
The duration of the recession
10 points
QUESTION 31
In order for the U.S. Treasury to avoid refinancing debt at higher interest rates, it will have to:
default on interest payments.
allow the Federal Reserve to engage in more quantitative easing.
issue more long term bonds.
issue less long terms bonds.
10 points
QUESTION 32
In order of their occurrence, the phases of the business cycle are:
peak, downturn, upturn, trough.
peak, upturn, downturn, trough.
peak, downturn, trough, upturn.
peak, upturn, trough, downturn.
10 points
QUESTION 33
In socialism:
economic forces do not operate.
individuals are encouraged to act for their own benefit.
government planning, rather than the market, is relied upon to coordinate economic activity.
distribution is determined by the individual's ability.
10 points
QUESTION 34
In which two markets did a bubble form that led to a financial crisis in 2008?
Housing and mortgage-backed securities.
Housing and automobiles.
Mortgage-backed securities and tulips.
South Sea Company and tulips.
10 points
QUESTION 35
Keynesian economists focus their analysis on:
the long run.
the short run.
aggregate supply.
economic growth.
10 points
QUESTION 36
Keynesians:
generally favor activist government policies.
generally favor laissez-faire policies.
believe that frictional unemployment does not exist.
believe that all unemployment is cyclical unemployment.
10 points
QUESTION 37
M1 consists primarily of cash in the hands of the public and:
savings account balances.
commercial paper.
checking account deposits.
certificates of deposit.
10 points
QUESTION 38
Macroeconomics is:
the study of individual choice and how that choice is influenced by economic forces.
the study of the pricing policies of firms and the purchasing decisions of households.
the study of aggregate economic relationships.
an analysis of economic reality that proceeds from the parts to the whole.
10 points
QUESTION 39
Markets coordinate economic activity through:
the price mechanism.
commanding individuals what to do.
asking individuals what to do.
the legal mechanism.
10 points
QUESTION 40
Monetary policy directly affects:
social spending.
tax rates.
the availability of credit.
the antitrust laws.
10 points
QUESTION 41
News Story: Workers at a car-manufacturing plant in Flint, Michigan are laid off because the economy is weak and GM cars aren't selling well. GM isn't sure when the plant will reopen. What type of unemployment describes the workers' situation?
Cyclical unemployment
Full unemployment
Structural unemployment
Frictional unemployment
10 points
QUESTION 42
Quantitative easing involves all of the following except for:
higher long-term interest rates.
higher asset prices.
Lower long-term interest rates.
Purchasing longer-term bonds.
10 points
QUESTION 43
production efficiency is increased because we have more of good X.
production efficiency is decreased because we have less of good Y.
production efficiency is decreased because we are no longer on the production possibility curve.
the change in efficiency is unclear.
10 points
QUESTION 44
A
B
C
D
10 points
QUESTION 45
Sunk costs:
are essential parts of economic decisions.
are irrelevant to economic decisions.
should be considered, but only when marginal cost is less than marginal benefit.
should be considered only when there is no information about marginal cost and marginal benefit.
10 points
QUESTION 46
Suppose nominal GDP is $14 trillion and the GDP deflator is 122.5. Given this information, what is real GDP?
$9.8 trillion
$11.4 trillion
$13.8 trillion
$15.2 trillion
10 points
QUESTION 47
Suppose the marginal cost of dating Perry is $30 and the marginal benefit is worth $40 to you. Following economic reasoning, you should:
date Perry.
not date Perry.
determine what your sunk costs are.
determine what your total benefits and total costs are.
10 points
QUESTION 48
Suppose the people in my town hear a rumor that their local bank is in trouble and all rush to withdraw money from the bank. This is referred to as:
leverage.
a moral hazard problem.
a bad precedent problem.
a bank run.
10 points
QUESTION 49
Suppose the reserve requirement is 20 percent. A $1 billion purchase of government securities by the Fed will:
increase the potential amount of checkable deposits in the banking system by $5 billion.
increase the potential amount of checkable deposits in the banking system by $1 billion.
reduce the potential amount of checkable deposits in the banking system by $1 billion.
reduce the potential amount of checkable deposits in the banking system by $5 billion.
10 points
QUESTION 50
Suppose you work in investments for a financial institution, and other banks are making a fortune with Irish goldmines. The fact that you are more likely to move to invest in Irish goldmines just because you see other banks doing so is called:
the law of diminishing control.
leverage.
herding.
diversification.
10 points
QUESTION 51
The Fed sells short-term debt and uses the proceeds to buy long-term debt. This represents:
precommitment policies.
standard monetary policy.
quantitative easing.
operation twist.
10 points
QUESTION 52
The business cycle is:
the term used to describe fluctuations in output around its long-term trend.
the length of time required by a firm to buy inputs and produce and sell output.
the pattern of increases and decreases in the money supply.
regular and predictable.
10 points
QUESTION 53
The defensive and offensive actions of the Fed differ because offensive actions are designed to:
tighten monetary policy and defensive actions are designed to ease monetary policy.
ease monetary policy and defensive actions are designed to tighten monetary policy.
change the current monetary policy while defensive actions are designed to reinforce the current monetary policy.
reinforce the current monetary policy while defensive actions are designed to change the current monetary policy.
10 points
QUESTION 54
The discount rate is the interest rate:
commercial banks charge their largest customers.
the Fed charges on loans to individuals.
the Fed charges on loans to commercial banks.
the interest rate commercial banks charge one another for overnight loans.
10 points
QUESTION 55
The effect of higher gasoline prices is most likely to:
increase the demand for hybrid cars and increase the demand for the gas guzzler Hummer.
decrease the demand for hybrid cars and decrease the demand for the gas guzzler Hummer.
increase the demand for hybrid cars and decrease the demand for the gas guzzler Hummer.
decrease the demand for hybrid cars and increase the demand for the gas guzzler Hummer.
10 points
QUESTION 56
The price mechanism that guides people's actions is called the:
invisible market force.
invisible hand.
invisible handshake.
invisible foot.
10 points
QUESTION 57
The primary tool of monetary policy is:
the discount rate.
the reserve requirement.
the prime rate.
open market operations.
10 points
QUESTION 58
The statement "government should provide affordable health care coverage for every member of society" is:
a statement that everyone agrees with.
a statement that everyone disagrees with.
a positive statement.
a normative statement.
10 points
QUESTION 59
Three hurricanes, combined with the already high real-estate prices, have made people reconsider whether to retire to Florida. The cost of homeownership has increased due to stricter building codes. The influx of retirees is not expected to change because the baby boom generation is approaching retirement age and Florida has long attracted many retirees. Which of the following factors is tending to move the demand curve for Florida housing to the right?
The aging of the baby boomers, increasing the number of people who are retiring
The increase in the cost of insurance
The already high real-estate prices
The current high construction costs
10 points
QUESTION 60
To keep the price of gas from rising quickly after Katrina, the government instituted price ceilings on the price of gasoline in some states. These price ceilings caused ______ in the gasoline market.
surpluses
movement of the demand curve
movement along the demand curve
shortages
10 points
QUESTION 61
Unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one is called:
structural unemployment.
frictional unemployment.
cyclical unemployment.
are not counted in the unemployment rate.
10 points
QUESTION 62
What tool of monetary policy will the Fed use to increase the federal funds rate from 1 percent to 1.25 percent?
Open-market operations
The discount rate
A change in reserve requirements
Margin requirements
10 points
QUESTION 63
When a clerk gives you a pair of jeans for your $20 bill, money is serving which function?
Medium of exchange
Store of real assets
Unit of account
Store of wealth
10 points
QUESTION 64
When the government runs a deficit, it will:
buy bonds to finance the deficit.
sell bonds to finance the deficit.
reduce the money supply to finance the deficit.
raise taxes immediately.
10 points
QUESTION 65
When there is unsustainable rapidly rising prices of some type of financial asset, such as stock, we refer to this a:
liquidity trap.
bubble.
bad-precedent problem.
moral-hazard problem.
10 points
QUESTION 66
Which of the following contributes to structural unemployment?
A general downturn in the economy.
People quitting a job just long enough to look for and find another one.
People over 65 who don't really want to work.
People losing a job when their skills become obsolete due to technological innovations.
10 points
QUESTION 67
Which of the following is a characteristic of a market economy?
Private property
Government ownership of the means of production
Distribution according to need
Tradition determines the what, how, and for whom decisions
10 points
QUESTION 68
Which of the following is not included in GDP but is included in GNP?
A foreign company's production in the United States
Income of a citizen of Germany working in the United States
Economic activity of U.S. citizens working abroad
Sales of a good by one firm to another firm
10 points
QUESTION 69
Who determines U.S. monetary policy?
Congress
The president
The Internal Revenue Service
The Federal Reserve
10 points
QUESTION 70
Your opportunity cost of taking this course is:
the tuition you paid for the course.
the net benefit of the activity you would have chosen if you had not taken the course.
the net benefit of taking this course.
the cost of the activity you would have chosen if you had not taken the course.
point A.
point B.
point C.
no point in the graph.
Explanation / Answer
1. Point A
3. A Budget Deficit is defined as a shortfall of revenues compared to expenditures.
4. it has only one owner who has unlimited liability.
5. leverage
6. recessionary gap
7. potential output exceeds actual output.
8. it is better suited to the production of one good than to the production of an alternative good.
9. a tax that government places on imported goods.
10. supply goods in order to obtain other goods.
11. technology.
12. people to buy fewer trading cards.
13. actual output exceeds potential output.
14. addresses the questions what is produced, how it is produced, and for whom it is produced.
15. was below equilibrium.
16. profits
17. generally favor laissez-faire policies.
18. how much debt a country incurs each year.
19. at the peak of the business cycle.
20. government spending and taxes.
21. the highest opportunity cost.
22. the value of new residential construction.
23. market value of an economy's production of final goods and services in a one year period.
24. 12
25. 117; The GDP deflator is a measure of price inflation. It is calculated by dividing Nominal GDP by Real GDP and then multiplying by 100.
26. remain unchanged
27. follow contractionary policy.
28. 12.5; [The money multiplier, m, is the inverse of the reserve requirement, RR:
]
29. 10
30. Paragraph is not provided
31. allow the Federal Reserve to engage in more quantitative easing.
32. peak, downturn, trough, upturn.
33. government planning, rather than the market, is relied upon to coordinate economic activity.
34. Housing and mortgage-backed securities.
35. the short run.
36. generally favor activist government policies
37. checking account deposits
38. the study of aggregate economic relationships.
39. the price mechanism
40. social spending.
41. Structural unemployment
42. higher asset prices
43. [picture is not provided]
44. [picture is not provided]
45. are essential parts of economic decisions.
46. $11.4 trillion
47. date Perry
48. bank run;
49. increase the potential amount of checkable deposits in the banking system by $1 billion
50. leverage
51. operation twist; Operation Twist, or 'Twist', is a policy by which the Federal Reserve sells short-term government bonds and buys long-dated Treasuries, in an effort to push down long-term interest rates and therefore boost the economy.
52. the term used to describe fluctuations in output around its long-term trend.
53. change the current monetary policy while defensive actions are designed to reinforce the current monetary policy.
54. the Fed charges on loans to commercial banks.
55.
56. invisible hand.
57. open market operations.
58. a normative statement.
59.
60. movement along the demand curve
61. frictional unemployment
62. A change in reserve requirements
63. medium of exchange
64. reduce the money supply to finance the deficit
65. bubble
66. A general downturn in the economy.
67. Tradition determines the what, how, and for whom decisions
68. Economic activity of U.S. citizens working abroad
69. The Federal Reserve
70. the cost of the activity you would have chosen if you had not taken the course
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