MONEY

MONEY

• 3. Money with intrinsic value is called • a. local money • b. fiat money • c. legal money • d. bullion money • e. commodity money

• 4. The most liquid form of money is • a. certificates of deposits • b. checking accounts • c. savings accounts • d. time deposits • e. currency

• 8. The equation of exchange is • a. MQ = PV • b. MVP = Q • c. M = VPQ • d. MP = VQ • e. MV = PQ

• 1. Which of the following is an example of fiat money?

• a. euros • b. gold • c. silver • d. salt • e. cigarettes

• 2. The breakdown of the American dollar into quarters, dimes, and pennies illustrates which characteristic of money?

• a. scarcity • b. acceptability • c. durability • d. divisibility • e. portability

• 3. The ease with which an asset can be converted into the economy's medium of exchange is referred to as its

• a. transferability • b. exchangeability • c. liquidity • d. acceptability • e. durability

• 6. Money used to buy a car serves as a(n) • a. unit of value • b. commodity • c. store of value • d. unit of account • e. medium of exchange

• 7. Money in the bank serves as a(n) • a. unit of account • b. medium of exchange • c. commodity • d. unit of value • e. store of value

• 8. A watermelon is valued at 2 dollars. This represents money's function as a(n)

• a. commodity • b. unit of account • c. unit of value • d. medium of exchange • e. store of value

• 9. Money must be able to be used in multiple transactions without wearing out. This represents which characteristic of money?

• a. acceptability • b. durability • c. scarcity • d. portability • e. divisibility

• 10. Money must be easy to transport. This represents which characteristic of money?

• a. divisibility • b. acceptability • c. scarcity • d. durability • e. portability

TRUE or FALSE

• 11. The United States Dollar is an example of commodity money.

• 12. Fiat money is created by government decree.

• 13. Money replaced barter, which required a double coincidence of wants.

• 14. United States Dollars are backed by gold.

• 15. Interest is the cost of using money or credit.

• F

• T

• T

• F

• T

• 4. The direct exchange of goods for other goods is known as

• a. commerce • b. barter • c. finance • d. retail • e. wholesale

• 5. Money facilitates trade by removing the need for

• a. voluntary exchange • b. a double coincidence of wants • c. property rights • d. supply and demand • e. markets

• 6. Barter is an example of a • a. store of value • b. means of exchange • c. unit of account • d. means of account • e. unit of value

GDP

• 5. Which of the following is not counted in GDP?

• a. the purchase of ten shares of Google stock • b. the government's purchase of aircraft

carriers • c. the purchase of a haircut • d. the purchase of new fashionable running

shoes • e. the construction of a manufacturing plant

• 11. Which category of GDP is the government's payment of a Social Security check counted in?

• a. net exports • b. government expenditures • c. investment • d. The government's payment of a Social

Security check is NOT counted in GDP. • e. consumption

• 6. Which of the following statements is NOT correct?

• a. Dave's purchase of cocaine is not counted in GDP.

• b. McDonalds’ purchase of hamburger buns is counted in consumption.

• c. Sven the Swede's purchase of American made jeans is counted in net exports.

• d. The Defense Department's purchase of a tank is counted in government purchases.

• e. General Motors’ purchase of machinery is counted in investment.

• 9. Which category makes up the largest share of the United States’ GDP?

• a. net exports • b. government purchases • c. investment • d. net imports • e. consumption

• 12. Which category of GDP is the purchase of a new home counted in?

• a. net exports • b. government expenditures • c. investment • d. consumption • e. The purchase of a new home is NOT

counted in GDP.

• 10. The factors of production flow from • a. firms to households via the product market • b. households to firms via the product market • c. households to firms via the government • d. households to firms via the factor market • e. firms to households via the factor market

• 11. Goods and services flow from • a. firms to households via the factor market • b. households to firms via the government • c. firms to households via the product market • d. households to firms via the factor market • e. households to firms via the product market

• 12. The money paid to firms via the product market is called

• a. wages • b. profit • c. revenue • d. taxes • e. income

• 13. The money paid to households via the factor market is called

• a. wages • b. profit • c. income • d. taxes • e. revenue

• 14. The money paid by households and firms to the government is called

• a. profit • b. taxes • c. revenue • d. wages • e. income

• 15. Which of the following represents an injection into the circular flow model?

• a. rent • b. imports • c. exports • d. savings • e. taxes

LABOR

• 7. Structural unemployment is caused by • a. skills mismatch • b. undervalued currency • c. economic downturn • d. high inflation • e. time-lag between jobs

• 8. Frictional unemployment is caused by • a. skills mismatch • b. undervalued currency • c. high inflation • d. time-lag between jobs • e. economic downturn

• 9. Cyclical unemployment is caused by • a. time-lag between jobs • b. undervalued currency • c. economic downturn • d. high inflation • e. skills mismatch

• 11. Steve is laid off during a recession. Steve is • a. frictionally unemployed • b. structurally unemployed • c. seasonally unemployed • d. cyclically unemployed • e. technologically unemployed

• 3. Machines took Dan the factory worker's job. Dan is

• a. seasonally unemployed • b. frictionally unemployed • c. structurally unemployed • d. technologically unemployed • e. cyclically unemployed

• 1. Steve recently quit his job as a bicycle repairman for greater monetary opportunities as a car salesman. Steve is

• a. technologically unemployed • b. cyclically unemployed • c. seasonally unemployed • d. structurally unemployed • e. frictionally unemployed

• 2. Dave, a financial analyst, was laid off during an economic downturn. Dave is

• a. seasonally unemployed • b. structurally unemployed • c. cyclically unemployed • d. frictionally unemployed • e. technologically unemployed

• 13. An abnormally high rate of which type of unemployment indicates a problem in the economy?

• a. seasonal • b. cyclical • c. frictional • d. structural • e. technological

• 4. Jill’s snow cone parlor shuts down in December. Jill is

• a. seasonally unemployed • b. structurally unemployed • c. cyclically unemployed • d. technologically unemployed • e. frictionally unemployed

• 5. Which of the following is not counted in the natural rate of unemployment and indicates a problem in the economy?

• a. cyclical unemployment • b. technological unemployment • c. frictional unemployment • d. seasonal unemployment • e. structural unemployment

• 6. In the United States, the natural rate of unemployment is approximately

• a. 2% • b. 15% • c. 0% • d. 10% • e. 5%

• 7. Which of the following groups is part of the labor force?

• a. people in prison • b. people counted in the unemployment rate • c. people who are retired • d. people under sixteen • e. people in the army

• 16. Jim, discouraged by his inability to hold down a job, has given up looking for work. Jim is counted in the unemployment rate.

• F

• 7. If the reserve ratio is 10%, a bank with deposits of $500 can loan out

• a. $350 • b. $100 • c. $250 • d. $50 • e. $450

• 8. If the reserve ratio is 20%, the money multiplier is

• a. 2 • b. 50 • c. 5 • d. 20 • e. 10

• 9. If the reserve ratio is 5%, how much money will be created in the economy by a deposit of $100?

• a. $100 • b. $4000 • c. $2000 • d. $1000 • e. $500

Monetary & Fiscal Policy

• 1. Modern fiscal policy results from the work of

• a. Jean Baptiste Say • b. Arthur Laffer • c. Thomas Malthus • d. Arthur Okun • e. John Maynard Keynes

• 2. Which policy measure would a Keynesian economist support to combat recession?

• a. deficit spending • b. balanced budget • c. decreasing wages • d. doing nothing • e. printing money

• 3. The goal of fiscal policy is to influence • a. aggregate demand • b. interest rates • c. the money supply • d. net exports • e. aggregate supply

• 4. Contractionary fiscal policy measures include

• a. decreasing the money supply and increasing interest rates

• b. decreasing government spending and the money supply

• c. increasing taxes and interest rates • d. increasing taxes and decreasing

government spending • e. decreasing taxes and government spending

• 5. Expansionary fiscal policy measures include • a. increasing the money supply and taxes • b. decreasing interest rates and government

spending • c. decreasing taxes and increasing government

spending • d. increasing government spending and

decreasing the money supply • e. increasing interest rates and decreasing

taxes

• 6. What is an appropriate fiscal policy measure to combat inflation?

• a. increasing government spending • b. increasing the discount rate • c. increasing the tax rate • d. There is no appropriate fiscal policy

measure to combat inflation. • e. increasing the federal funds rate

• 6. What is an appropriate fiscal policy measure to combat inflation?

• a. increasing government spending • b. increasing the discount rate • c. increasing the tax rate • d. There is no appropriate fiscal policy

measure to combat inflation. • e. increasing the federal funds rate

• 7. What is an appropriate fiscal policy measure to combat recession?

• a. decreasing the federal funds rate • b. increasing government spending • c. There is no appropriate fiscal policy

measure to combat recession. • d. increasing the reserve ratio • e. purchasing government securities

• 8. What is an appropriate fiscal policy measure to combat stagflation?

• a. increasing the discount rate • b. There is no appropriate fiscal policy

measure to combat stagflation. • c. decreasing government spending • d. purchasing government securities • e. decreasing the tax rate

• 10. If MPS is .2, a household with an income of $100,000 will spend

• a. $60,000 • b. $80,000 • c. $40,000 • d. $20,000 • e. $100,000

• 11. If MPC is .75, a household with an income of $100,000 will save

• a. $10,000 • b. $25,000 • c. $50,000 • d. $85,000 • e. $75,000

• 15. Fiscal policy measures that require deliberate action from policy makers is

• a. automatic fiscal policy • b. facultative fiscal policy • c. marginal fiscal policy • d. discretionary fiscal policy • e. technical fiscal policy

• 17. An example of discretionary fiscal policy is • a. monetarism • b. corporate bailouts • c. Social security payments • d. open market operations • e. unemployment insurance payments

• 18. An example of automatic fiscal policy is • a. open market operations • b. unemployment insurance payments • c. monetarism • d. corporate bailouts • e. Social Security payments

• 19. The existing national debt is $50 billion. During the fiscal year, the government took in $10 billion in revenue and spent $15 billion. What is the current budget deficit?

• a. $35 billion • b. $5 billion • c. $65 billion • d. $55 billion • e. $25 billion

• 20. The national debt begins the year at $50 billion. During the subsequent fiscal year, the government takes in $10 billion in revenue and spends $15 billion. What is the national debt at the end of the year?

• a. $65 billion • b. $5 billion • c. $35 billion • d. $25 billion • e. $55 billion

• 2. How many district banks make up the Federal Reserve?

• a. 5 • b. 7 • c. 10 • d. 14 • e. 12

• 3. How many people serve on the Federal Reserve Board of Governors?

• a. 5 • b. 12 • c. 7 • d. 10 • e. 14

• 4. Each member of the Federal Reserve Board of Governors is appointed

• a. to a 4-year term • b. for life • c. to a 14-year term • d. to a 10-year term

• 6. The main function of the Federal Reserve is to

• a. regulate the money supply • b. levy taxes • c. conduct fiscal policy • d. regulate wages • e. regulate international trade

• 8. The current head of the Federal Reserve is • a. Rodrigo de Rato • b. Robert Zoellick • c. Ben Bernanke • d. Paul Wolfowitz • e. Alan Greenspan

• 9. Buying and selling government securities is a role of the

• a. Bureau of Labor Statistics • b. Council of Economic Advisers • c. Federal Open Market Committee • d. Federal Advisory Council • e. Federal Reserve Board of Governors

• 12. The primary tool of monetary policy is • a. open market operations • b. the discount rate • c. the reserve ratio • d. government expenditures • e. taxation

• 13. The interest rate the Federal Reserve charges for loans to banks is called the

• a. consumer rate • b. discount rate • c. reserve rate • d. federal funds rate • e. prime rate

• 14. The interest rate on overnight loans between banks is called the

• a. consumer rate • b. discount rate • c. federal funds rate • d. reserve rate • e. prime rate

• 17. An example of a tight money policy is • a. decreasing the discount rate • b. decreasing the federal funds rate • c. increasing the tax rate • d. increasing the reserve ratio • e. purchasing government securities

• 18. A monetary policy measure to combat recession is

• a. increasing government expenditures • b. increasing the reserve ratio • c. purchasing government securities • d. decreasing the tax rate • e. increasing the federal funds rate

• 19. A monetary policy measure to combat inflation is

• a. decreasing the tax rate • b. increasing government expenditures • c. increasing the discount rate • d. decreasing the reserve ratio • e. decreasing the prime rate

• 10. The interest rate that banks charge their most credit worthy customers is called the

• a. consumer rate • b. annual percentage rate • c. prime rate • d. discount rate • e. federal funds rate

• 11. If the nominal interest rate is 6% and the rate of inflation is 4%, the real interest rate is

• a. 6% • b. 4% • c. 10% • d. 2% • e. 24%

• 15. Which of the following groups of people is helped by inflation?

• a. those on a fixed income • b. debtors • c. creditors • d. savers • e. pensioners

• 11. The Consumer Price Index is compiled by the

• a. Bureau of Economic Analysis • b. Office of Management and Budget • c. National Labor Relations Board • d. Internal Revenue Service • e. Bureau of Labor Statistics

• 12. If the CPI is 120, an ice cream cone that was $2.00 in the base year is now

• a. $3.60 • b. $4.40 • c. $2.40 • d. $3.20 • e. $2.80

• Occurs when there is an increase in the cost of inputs of supply:

• a. demand-pull inflation• b. cost-push inflation• c. disinflation• d. deflation• e. hyperinflation