GOVT. IN THE ECONOMY PRACTICE QUIZ

Transcription

1 TRUE/FALSE GOVT. IN THE ECONOMY PRACTICE QUIZ 1. To be a successful medium of exchange, money must exist in an unlimited supply. 2. Fiat money has no inherent worth. 3. Gross Domestic Product is an index that measures price changes by domestic producers. 4. GDP that has been adjusted to remove inflation is called current GDP. 5. Structural is usually temporary. 6. The rate does not take into account the number of part-time workers who want to have full-time jobs. 7. Full employment is reached when the rate drops below 7 percent. 8. The Fed requires all member banks to deposit a percentage of every deposit either in their bank vaults or in the Fed to use as a reserve. 9. The Fed can implement its monetary policy by buying and selling government securities. 10. If the Fed increases the interest rate, it will increase the supply of money. 11. A long-run effect of increasing the money supply can be inflation. MULTIPLE CHOICE 12. Money that has an alternative use as an economic good is (A) Commodity money (B) Wampum (C) Fiat money (D) Specie 13. In order for money to have value, it must have all of the following characteristics EXCEPT (A) Portability (B) Durability (C) Plentiful availability (D) Divisibility 14. Unemployment that is directly related to swings in the business cycle is (A) Frictional (B) Cyclical (C) Structural (D) Seasonal 15. Changes in technology and changes in consumer tastes can cause (A) Frictional (B) Cyclical (C) Structural (D) Seasonal

2 16. According to the demand-pull theory, inflation is caused by (A) Workers (B) Producers (C) Government (D) Consumers 17. In the short run, in increase in the money supply results in (A) Lower interest rates (B) Economic expansion (C) Higher interest rates (D) Increased consumer spending COMPLETION 18. GDP is the most complete measure of a nation s. 19. Although the Fed functions as the central bank of the United States, it is owned by. 20. Under an easy money policy, the Fed allows the money supply to grow and interest rates to. 21. When the Fed buys government securities, the money supply. 22. Tightening the money supply causes interest rates to. MATCHING 23. When the government must borrow money to pay for government programs 24. Social programs that provide services or income to all individuals who meet eligibility requirements 25. Situation in which federal spending exceeds revenue 26. Total amount the government borrowed from investors to finance deficit spending (A) Entitlements (B) Deficit spending (C) Federal debt (D) Federal budget deficit (E) Barter economy 27. Economy based on trade rather than money

3 28. Something accepted as payments for goods and services 29. Anything that serves as a medium of exchange and a store of value 30. Rush by depositors to withdraw their funds from a bank 31. Anything a government decrees to by money 32. Nation s central bank (A) Medium of exchange (B) Federal Reserve System (C) Fiat money (D) Run on the bank (E) Money 33. Statistics used to measure changes in prices over time 34. Dollar amount of all final goods and services produced within a country s borders in a year 35. Measure of price changes received by domestic producers for their output 36. Price changes for about 90,000 items 37. Percent of people out of work divided by the total number of people in the civilian labor force 38. Decrease in the general price level 39. State of the economy characterized by high, acute shortages, and excess production capacity 40. Unemployment caused when machines replace people 41. Unemployment resulting from changes in the weather or changes in demand for certain products 42. Period during which real GDP declines for two quarters in a row or for six consecutive months (A) Gross Domestic Product (B) Producer price index (C) Price index (D) Consumer price index (E) Unemployment rate (A) Technological (B) Depression (C) Deflation (D) Seasonal (E) Recession

4 43. Inflation in the range of 1 to 3 percent per year 44. Caused by a fundamental change in the operations of the economy 45. Fed plan to allow the money supply to grow and interest rates to fall 46. Fed s plan for expanding or contracting the money supply 47. Fed plan to restrict the money supply and allow interest rates to rise 48. Rule stating that a percentage of every deposit must be set aside as legal reserves 49. Deposit a member bank keeps at the Fed 50. Interest rate the Fed charges on loans to financial institutions (A) Structural (B) Creeping inflation (C) Tight money policy (D) Monetary policy (E) Easy money policy (A) Prime rate (B) Reserve requirement (C) Member bank reserve (D) Discount rate 51. Best or lowest interest rate that commercial bankers charge their customers

5 ANSWERS: 1. F 2. T 3. F 4. F 5. F 6. T 7. F 8. T 9. T 10. F 11. T 12. A 13. C 14. B 15. C 16. D 17. A 18. output/production 19. member banks 20. fall/decline 21. expands 22. increase/rise 23. B 24. A 25. D 26. C 27. E 28. A 29. E 30. D 31. C 32. B 33. C 34. A 35. C 36. D 37. E 38. C 39. B 40. A 41. D 42. E 43. B 44. A 45. E 46. D 47. C 48. B 49. C 50. D 51. A