Lesson 9 Flashcards
Knowledge Check
Low interest rates and high unemployment would be characteristic of what phase of the business cycle?
A. Expansion
B. Peak
C. Contraction
D. Trough
D. Trough
Expansion: increasing interest rates, decreasing unemployment.
Peak: highest interest rates, lowest unemployment.
Contraction: decreasing interest rates, increasing unemployment.
Trough: lowest interest rates, highest unemployment.
Knowledge Check
During a period of recession/contraction, all of the following would be true except?
A. The supply of goods and services would be decreasing
B. Interest rates would be decreasing
C. Unemployment would be increasing
D. Inflation would be increasing
D. Inflation would be increasing
During a recession / contraction, there is a decline in demand. GDP is decreasing, inflation is decreasing, and unemployment is increasing. Since demand is decreasing, the supply of goods and services will also be decreasing. To stimulate economic growth, the money supply will likely increase, causing interest rates to decline.
Knowledge Check
What are the three primary goals of the Federal Reserve?
- Maintain price levels
- Maintain full employment
- Facilitate long-term economic growth
Knowledge Check
If the federal reserve wants to increase interest rates, which of the following actions my it take?
A. Buy government securities
B. Sell government securities
C. Decrease the reserve requirement
D. Decrease the federal government spending
B. Sell government securities
For interest rates to increase, the money supply must decrease. If the Federal Reserve sells government securities, they are putting notes on the market and taking cash off the market. As cash comes off the market, the money supply decreases, and interest rates increase. Decreasing the reserve requirement will increase the money supply and lower interest rates. Congress controls federal government spending, not the Federal Reserve.
Knowledge Check
All of the following statements about the Federal Reserve’s use of open market operations in a tightening policy are correct EXCEPT:
A. More cash would be added to the Federal Reserve’s balance sheet.
B. More Treasury securities would enter the open market.
C.Interest rates would likely decrease.
D. The money supply would decrease.
C. Interest rates would likely decrease.
Under a tightening policy, the Federal Reserve sells Treasury securities on the open market and adds more cash to its balance sheet. With less money in the open market to be loaned out, the banks are likely to raise interest rates.
Knowledge Check
Movement along the demand curve represents a change in quantity demanded. Which of the following is the most likely cause of a change in quantity demanded?
A. Increased savings rate
B. Decrease tax rate
C. Price change
D. More suppliers
C. Price change
Anytime there is a change in price, it is a movement along the demand or supply curve. Movement along the demand curve is a change in quantity demanded. A change in the savings or tax rates will cause the demand curve to shift. As more suppliers enter the market, the supply curve will shift to the left.
Knowledge Check
A country raises tax rates. What effect is this likely to have on the demand and supply curves?
A. The demand curve will likely shift down and to the left.
B. The demand curve will likely shift up and to the right.
C. The supply curve will likely shift down and to the right.
D. Tax rates are not usually related to demand or supply curves.
A. The demand curve will likely shift down and to the left.
Higher tax rates will likely shift the demand curve down and to the left.
Knowledge Check
The most popular method of determining a credit score is the Fair Isaac Credit Organization (FICO) method.
A. True
B. False
A. True
Knowledge Check
All of the following claims will be discharged in bankruptcy EXCEPT
A. Tort claim as a result of personal negligence
B. Consumer credit card debt
C. A claim arising out of a breach of contract
D. Child support
D. Child support
The following debts are not discharged in bankruptcy: all student loans, property liens, three years of back taxes, child support, alimony, and debts obtained through fraud.
Knowledge Check
The Shady Merchant Bank, an FDIC member, has just gone bankrupt. Your client had two accounts with them: an individual checking account and a joint savings account with his wife. What is his household’s FDIC limit for these accounts?
A. $100,000
B. $250,000
C. $500,000
D. $750,000
D. $750,000
FDIC protection is $250,000 per depositor per account. His household receives $250,000 from his checking account. Both he and his wife receive an additional $250,000 from the joint account ($500,000 total from the joint account). Therefore, they receive $750,000 total ($250,000 + $500,000).
Knowledge Check
Your friend is always chasing the next get-rich-quick scheme. After receiving an inheritance, he opened an account with an SIPC insured broker and then invested everything in a single penny stock from a risky company. That company just declared bankruptcy. “No problem,” he tells you, “The feds will just bail me out – that’s what SIPC insurance is for.” What do you tell him?
A. He’s correct, but only up to $500,000
B. He’s correct, but only up to $250,000
C. He’s incorrect: SIPC insurance protects only cash, not investments
D. He’s incorrect: SIPC insurance does not protect against investment loses
D. He’s incorrect: SIPC insurance does not protect against investment loses
SIPC protects consumers from losses due to brokerage failure. It does not protect against investment losses.
Quiz
Which act established regulations of the primary market?
A. The Securities Act of 1933
B. The Securities Exchange Act of 1934
C. The Investment Company Act of 1940
D. The Investment Advisers Act of 1940
A. The Securities Act of 1933
The Securities Act of 1933 established regulations of the primary market.
Quiz
Which of the following statements is correct?
Question 1 options:
A) A U.S. businessman who owns a factory in Mexico would be included in the U.S. GDP.
B) A U.S. soccer player who plays professionally in New Zealand would be included in the U.S. GNP.
C) An Australian actor who works in the United States would not be included in the U.S. GDP.
D) All of the above are correct.
B) A U.S. soccer player who plays professionally in New Zealand would be included in the U.S. GNP.
Quiz
Which of the following terms is used to describe a situation in which inflation is continuing but at a declining rate?
Question 2 options:
A) Disinflation
B) Deflation
C) Outflation
D) None of the above
Quiz
Which of the following terms is used to describe a situation in which inflation is continuing but at a declining rate?
Question 2 options:
A) Disinflation
B) Deflation
C) Outflation
D) None of the above
A) Disinflation
Quiz
Which of the following terms describes a situation in which an individual is voluntarily unemployed because he or she is seeking other job opportunities and has yet to find the desired employment?
Question 3 options:
A) Cyclical unemployment
B) Structural unemployment
C) Wait-and-see unemployment
D) Frictional unemployment
D) Frictional unemployment
Quiz
Which of the following is NOT one of the Federal Reserve’s primary goals?
Question 4 options:
A) Maintain full employment.
B) Keep interest rates low.
C) Maintain price levels.
D) Maintain long-term economic growth.
B) Keep interest rates low.
Quiz
Which of the following would cause the demand curve to shift downward and to the left?
Question 5 options:
A) A decrease in the price of a substitute product
B) An increase in disposable income
C) A decrease in tax rates
D) A decrease in the unemployment rate
A) A decrease in the price of a substitute product
Quiz
Which of the following is an example of monetary policy?
Question 6 options:
A) Adjusting the discounting rate
B) Adjusting the reserve requirement
C) Conducting open market operations
D) All of the above
D) All of the above
Quiz
Which of the following is not a goal of the Federal Deposit Insurance Corporation (FDIC)?
Question 7 options:
A) Insure deposits.
B) Protect the consumer from excessive losses in the stock market.
C) Manage receiverships.
D) Supervise financial institutions for financial stability.
B) Protect the consumer from excessive losses in the stock market.
