Unit 6

Question 1

As commercial banks keep more excess reserves money creation…

Answer 1

Decreases

Question 2

Why does the federal reserve alter monetary policy

Answer 2

To lessen the effect of natural business cycles

Question 3

All of the following are characteristics of classical economics except

Answer 3

A significant role for government in running the economy

Question 4

The federal government spends the largest amount of its budget on Social Security which is an example of

Answer 4

Mandatory spending

Question 5

What is the major difference between an operating budget and a capital budget

Answer 5

Operating budget is for day-to-day expenses a capital budget is for investment spending

Question 6

What affect wouldn’t increase in the discount rate have on the money supply

Answer 6

It would cause the money supply to contract

Question 7

How many Federal Reserve districts are there

Answer 7

12

Question 8

What leads directly to the crowding-out-effect

Answer 8

A big federal budget deficit

Question 9

The federal budget is put together…

Answer 9

By Congress and the White House

Question 10

All the following are constitutional limits on the power to tax except that

Answer 10

Exports must not be taxed

Question 11

Which of these is an example of inside lag in monetary policy

Answer 11

Members of the board of governors disagree on the state of economy and refused to lower the discount rate several months after a recession has begun

Question 12

Which of the following is one way the federal reserve bank serves the government

Answer 12

Selling government securities

Question 13

How did the great depression relate to the school of classical economics

Answer 13

The Great depression appeared to disapprove the classical theory that demand and supply could return to a healthy equilibrium through MarketForce alone

Question 14

The office of management and budget…

Answer 14

Is responsible for deciding how much money each government agency receives in the budget

Question 15

Your pay stub deducts money for FICA. what does this mean

Answer 15

Money is being withheld to fund Social Security and Medicare

Question 16

Which of the following investments is not used by the Federal Reserve to change the money supply

Answer 16

The federal tax code

Question 17

How could the federal reserve encourage banks to lend out more of their reserves

Answer 17

Reduce the discount rate

Question 18

All of the following are problems associated with a high national debt except that it…

Answer 18

Makes investing in treasury bonds notes and bills very risky

Question 19

Which of the following is not tax-exempt

Answer 19

The convenience store on the corner

Question 20

What is the major source of tax revenue for local governments

Answer 20

Property taxes

Question 21

What is the relationship between interest rates in demand for money

Answer 21

As interest rates decrease demand for money increases

Question 22

Why does a bank sometimes hold excess reserves

Answer 22

To be sure they can meet their customers demands

Question 23

What will lead directly to a government shutdown

Answer 23

The president vetoes Congress’ appropriate goals

Question 24

The national debt rose during Ronald Reagan’s term as president for all the following except

Answer 24

The cost of running a war

Question 25

All but which of the following may be claimed as a tax deduction

Answer 25

Money spent on household expenses

Question 26

The required reserve ratio is 10%, the money multiplier is…

Answer 26

10

Question 27

Which of these presidents increased top marginal income tax rates during his term in office

Answer 27

Franklin D Roosevelt

Question 28

All of the following are reasons why it is difficult to implement balance fiscal policy except

Answer 28

The need for discretionary spending

Question 29

When you drive away from the gas pump you have just paid an

Answer 29

Excise tax

Question 30

Who generally bears most sales tax when the demand for the good taxed is inelastic

Answer 30

The consumer

Question 31

Which of the following situations is most likely to cause the fed to introduce a tight money supply

Answer 31

You called me is expanding quickly and inflation is a concern

Question 32

What does lender of last resort mean with respect to the federal reserve

Answer 32

It will lend money to a bank in a financial emergency

Question 33

Which of the following is a fundamental part of supply side economics

Answer 33

The government should reduce taxes to promote economic growth by increasing aggregate supply

Question 34

All the phone people are well known classical economists except

Answer 34

Arthur Laffer

Question 35

Suppose your total taxable income this year is 75,000 we are taxed at a rate of 10% on the first. 25,000 20% on the next. 25,000 and 30% on the final 25,000. What is your total income tax

Answer 35

15,000

Question 36

What type of policy does the fed used to counteract a contraction

Answer 36

Easy money policy

Question 37

Which statement describes the federal government fiscal policies in the 1980s

Answer 37

Income tax rates were reduced but spending increased

Question 38

The purpose of expansionary fiscal policy is to

Answer 38

Increase output

Question 39

Which is an example of discretionary spending

Answer 39

Education

Question 40

Which of the following defines a means tested program

Answer 40

Eligibility depends on income

Question 41

The Federal Reserve system consists of ______ federal reserve banks

Answer 41

12

Question 42

What is the cost of money

Answer 42

The price of the in street rate

Question 43

Supporters of supply-side economics believe that

Answer 43

Taxes have a strong negative influence on economic output

Question 44

What happens to the money that your employer withhold from your paycheck

Answer 44

Your employer sends it to the federal government to help pay your income tax bill

Question 45

What is an entitlement

Answer 45

Is social welfare program providing benefits to people who meet certain eligibility requirements

Question 46

Suppose the required reserve ratio is 20% a $5 million deposit allows commercial banks to create as much as

Answer 46

$25 million

Question 47

What type of policy does the federal reserve used to counteract and expansion that is causing high interest rates

Answer 47

Tight money policy

Question 48

Which of the following is a contractionary fiscal party

Answer 48

The president and Congress pass a new two cent per gallon gasoline tax

Question 49

Who is likely to bear the incidence of a 10% tax on cable television

Answer 49

The producer

Question 50

When revenue exceeds expenditures

Answer 50

There is a budget surplus