Mr. Weiss Unit 5 5.Business cycles in the United States a.occur about every 6 years. b.occur irregularly. c.always follow the same pattern. d.are always.

Mr. Weiss

Unit 5

5.5. Business cycles in the United StatesBusiness cycles in the United States

a.a. occur about every 6 years.occur about every 6 years.b.b. occur irregularly.occur irregularly.c.c. always follow the same pattern.always follow the same pattern.d.d. are always preceded by periods of are always preceded by periods of

mild inflation.mild inflation.

Mr. Weiss

Unit 5

5.5. Business cycles in the United StatesBusiness cycles in the United States

a.a. occur about every 6 years.occur about every 6 years.b.b. occur irregularly.occur irregularly.c.c. always follow the same pattern.always follow the same pattern.d.d. are always preceded by periods of are always preceded by periods of

mild inflation.mild inflation.

Mr. Weiss

Unit 5

10. Which of the following 10. Which of the following events could cause this curve to events could cause this curve to shift to the right?shift to the right?

a.a. an increase in taxesan increase in taxesb.b. a decrease in interest ratesa decrease in interest ratesc.c. an increase in the price for foreign oilan increase in the price for foreign oil

d. a decrease in the price leveld. a decrease in the price level

Mr. Weiss

Unit 5

10. Which of the following 10. Which of the following events could cause this curve to events could cause this curve to shift to the right?shift to the right?

a.a. an increase in taxesan increase in taxesb.b. a decrease in interest ratesa decrease in interest ratesc.c. an increase in the price for foreign oilan increase in the price for foreign oil

d. a decrease in the price leveld. a decrease in the price level

Mr. Weiss

Unit 5

15.15.The producer price index measuresThe producer price index measures

a. changes in the prices producers charge for the a. changes in the prices producers charge for the goods they sell.goods they sell.

b. changes in the prices producers pay for the b. changes in the prices producers pay for the goods they buy.goods they buy.

c. changes in the prices producers pay for salary c. changes in the prices producers pay for salary wages.wages.

d. changes in the volume of producer sales.d. changes in the volume of producer sales.

Mr. Weiss

Unit 5

15.15.The producer price index measuresThe producer price index measures

a. changes in the prices producers charge for the a. changes in the prices producers charge for the goods they sell.goods they sell.

b. changes in the prices producers pay for the b. changes in the prices producers pay for the goods they buy.goods they buy.

c. changes in the prices producers pay for salary c. changes in the prices producers pay for salary wages.wages.

d. changes in the volume of producer sales.d. changes in the volume of producer sales.

Mr. Weiss

Unit 5

20. 20. It will take a few years for the global economy to achieve a new equilibrium between It will take a few years for the global economy to achieve a new equilibrium between manufacturing production and consumer demand. Many goods are now in oversupply, manufacturing production and consumer demand. Many goods are now in oversupply, and consumer demand is impaired by falling currencies and growth-inhibiting and consumer demand is impaired by falling currencies and growth-inhibiting governmental policies. . . . But these are cyclical imbalances of the sort that have governmental policies. . . . But these are cyclical imbalances of the sort that have occurred for decades and will keep recurring from time to time.occurred for decades and will keep recurring from time to time.

Source: Source: Kiplinger’s Personal Finance Magazine, November 1998.Kiplinger’s Personal Finance Magazine, November 1998.

This passage is describingThis passage is describing

a.a.a shift in aggregate demand.a shift in aggregate demand.b.b.a shift in aggregate supply.a shift in aggregate supply.c.c.a global economic boom.a global economic boom.d. equilibrium between aggregate supply and demand.d. equilibrium between aggregate supply and demand.

Mr. Weiss

Unit 5

20. 20. It will take a few years for the global economy to achieve a new equilibrium between It will take a few years for the global economy to achieve a new equilibrium between manufacturing production and consumer demand. Many goods are now in oversupply, manufacturing production and consumer demand. Many goods are now in oversupply, and consumer demand is impaired by falling currencies and growth-inhibiting and consumer demand is impaired by falling currencies and growth-inhibiting governmental policies. . . . But these are cyclical imbalances of the sort that have governmental policies. . . . But these are cyclical imbalances of the sort that have occurred for decades and will keep recurring from time to time.occurred for decades and will keep recurring from time to time.

Source: Source: Kiplinger’s Personal Finance Magazine, November 1998.Kiplinger’s Personal Finance Magazine, November 1998.

This passage is describingThis passage is describing

a.a.a shift in aggregate demand.a shift in aggregate demand.b.b.a shift in aggregate supply.a shift in aggregate supply.c.c.a global economic boom.a global economic boom.d. equilibrium between aggregate supply and demand.d. equilibrium between aggregate supply and demand.

Mr. Weiss

Unit 525.25.One of the drawbacks of electronic funds One of the drawbacks of electronic funds

transfer istransfer is

a. it can take longer than manual transfers.a. it can take longer than manual transfers.b. the possibility of tampering is increased because b. the possibility of tampering is increased because

records are stored in a computer.records are stored in a computer.c. ATMs cannot always handle electronic funds c. ATMs cannot always handle electronic funds

transfers.transfers.d. not all banks are equipped to handle electronic d. not all banks are equipped to handle electronic

funds transfer.funds transfer.

Mr. Weiss

Unit 525.25.One of the drawbacks of electronic funds One of the drawbacks of electronic funds

transfer istransfer is

a. it can take longer than manual transfers.a. it can take longer than manual transfers.b. the possibility of tampering is increased because b. the possibility of tampering is increased because

records are stored in a computer.records are stored in a computer.c. ATMs cannot always handle electronic funds c. ATMs cannot always handle electronic funds

transfers.transfers.d. not all banks are equipped to handle electronic d. not all banks are equipped to handle electronic

funds transfer.funds transfer.

Mr. Weiss

Unit 5

30.30.Representative money is money that isRepresentative money is money that is

a. backed by a valuable item, such as gold.a. backed by a valuable item, such as gold.b. used in comparison for the values of goods b. used in comparison for the values of goods

and services.and services.c. accepted in payment for private debts.c. accepted in payment for private debts.d. coins and bills.d. coins and bills.

Mr. Weiss

Unit 5

30.30.Representative money is money that isRepresentative money is money that is

a. backed by a valuable item, such as gold.a. backed by a valuable item, such as gold.b. used in comparison for the values of goods b. used in comparison for the values of goods

and services.and services.c. accepted in payment for private debts.c. accepted in payment for private debts.d. coins and bills.d. coins and bills.

Mr. Weiss

Unit 5

34.34.When you use the item shown in the When you use the item shown in the illustration, you are usingillustration, you are using

a.a. money.money. c.c. fiat money.fiat money.b.b. near money.near money. d.d. borrowed money.borrowed money.

Mr. Weiss

Unit 5

34.34.When you use the item shown in the When you use the item shown in the illustration, you are usingillustration, you are using

a.a. money.money. c.c. fiat money.fiat money.b.b. near money.near money. d.d. borrowed money.borrowed money.

Mr. Weiss

Unit 5The Federal ReserveThe Federal Reserve, confronted with a global stock sell-off fanned by increased , confronted with a global stock sell-off fanned by increased fears of a recession, cut a key fears of a recession, cut a key interest rate by three-quarters of a percentage point on interest rate by three-quarters of a percentage point on Tuesday. Tuesday. The Fed said it was The Fed said it was cutting the federal funds rate, the interest that banks charge each cutting the federal funds rate, the interest that banks charge each other on overnight loans, other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point to 3.5 percent, down by three-fourths of a percentage point from 4.25 from 4.25 percent. percent. The Fed The Fed action was the most dramatic signal it can send that it is concerned about a action was the most dramatic signal it can send that it is concerned about a potentialpotential recession in the U.S. It marked the biggest one-day move by the central recession in the U.S. It marked the biggest one-day move by the central bank in bank in recent memoryrecent memory. . Source: “The Fed Cuts Rates,” businessweek.comSource: “The Fed Cuts Rates,” businessweek.com, January 22, 2008., January 22, 2008.

40.40. According to the passage, the Fed pushed According to the passage, the Fed pushed what rate to its lowest level since 1961?what rate to its lowest level since 1961?a.a. discount ratediscount rate c.c. prime rateprime rateb.b. federal funds ratefederal funds rate d.d. reserve ratereserve rate

Mr. Weiss

Unit 5The Federal ReserveThe Federal Reserve, confronted with a global stock sell-off fanned by increased , confronted with a global stock sell-off fanned by increased fears of a recession, cut a key fears of a recession, cut a key interest rate by three-quarters of a percentage point on interest rate by three-quarters of a percentage point on Tuesday. Tuesday. The Fed said it was The Fed said it was cutting the federal funds rate, the interest that banks charge each cutting the federal funds rate, the interest that banks charge each other on overnight loans, other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point to 3.5 percent, down by three-fourths of a percentage point from 4.25 from 4.25 percent. percent. The Fed The Fed action was the most dramatic signal it can send that it is concerned about a action was the most dramatic signal it can send that it is concerned about a potentialpotential recession in the U.S. It marked the biggest one-day move by the central recession in the U.S. It marked the biggest one-day move by the central bank in bank in recent memoryrecent memory. . Source: “The Fed Cuts Rates,” businessweek.comSource: “The Fed Cuts Rates,” businessweek.com, January 22, 2008., January 22, 2008.

40.40. According to the passage, the Fed pushed According to the passage, the Fed pushed what rate to its lowest level since 1961?what rate to its lowest level since 1961?a.a. discount ratediscount rate c.c. prime rateprime rateb.b. federal funds ratefederal funds rate d.d. reserve ratereserve rate

Mr. Weiss

Unit 5

45.45. The main tool the Fed uses to affect The main tool the Fed uses to affect interest rates isinterest rates is

a.a. a loose money policy.a loose money policy.b.b. a tight money policy.a tight money policy.c.c. open market operations.open market operations.d. check clearing.d. check clearing.

Mr. Weiss

Unit 5

45.45. The main tool the Fed uses to affect The main tool the Fed uses to affect interest rates isinterest rates is

a.a. a loose money policy.a loose money policy.b.b. a tight money policy.a tight money policy.c.c. open market operations.open market operations.d. check clearing.d. check clearing.

Mr. Weiss

Unit 5

50. Which of the following is affected by 50. Which of the following is affected by decisions of the Federal Open Market decisions of the Federal Open Market Committee?Committee?

a.a.check clearingcheck clearingb.b.interest ratesinterest ratesc.c.Congress’s ability to mint coinsCongress’s ability to mint coinsd. the amount of individual loansd. the amount of individual loans

Mr. Weiss

Unit 5

50. Which of the following is affected by 50. Which of the following is affected by decisions of the Federal Open Market decisions of the Federal Open Market Committee?Committee?

a.a.check clearingcheck clearingb.b.interest ratesinterest ratesc.c.Congress’s ability to mint coinsCongress’s ability to mint coinsd. the amount of individual loansd. the amount of individual loans

Mr. Weiss

Unit 5

55. According to the graph, 55. According to the graph, government spending government spending accounted for about what accounted for about what portion of the total value of portion of the total value of the nation’s output between the nation’s output between 1980 and 2000? 1980 and 2000?

a.a.about a quarterabout a quarterb.b.about a thirdabout a thirdc.c.about halfabout halfd. about two thirdsd. about two thirds

Mr. Weiss

Unit 5

55. According to the graph, 55. According to the graph, government spending government spending accounted for about what accounted for about what portion of the total value of portion of the total value of the nation’s output between the nation’s output between 1980 and 2000? 1980 and 2000?

a.a.about a quarterabout a quarterb.b.about a thirdabout a thirdc.c.about halfabout halfd. about two thirdsd. about two thirds

Mr. Weiss

Unit 560.60.According to the graph, According to the graph,

about what percentage of about what percentage of total spending did the total spending did the federal government spend federal government spend in 2007 for the privilege of in 2007 for the privilege of using borrowed money?using borrowed money?

a.a. a little more than 10%a little more than 10%b.b. a little less than 10%a little less than 10%c.c. a little more than 20%a little more than 20%d. about 15%d. about 15%

Mr. Weiss

Unit 560.60.According to the graph, According to the graph,

about what percentage of about what percentage of total spending did the total spending did the federal government spend federal government spend in 2007 for the privilege of in 2007 for the privilege of using borrowed money?using borrowed money?

a.a. a little more than 10%a little more than 10%b.b. a little less than 10%a little less than 10%c.c. a little more than 20%a little more than 20%d. about 15%d. about 15%

Mr. Weiss

Unit 565. 65. Every year at this timeEvery year at this time, Congress discovers, with a great public show of dismay and , Congress discovers, with a great public show of dismay and indignationindignation, the existence of the American tax code and the agency that administers it, the , the existence of the American tax code and the agency that administers it, the Internal Revenue Internal Revenue Service. There are high-minded calls for abolishing the current tax system Service. There are high-minded calls for abolishing the current tax system and replacing it....and replacing it....Around April 15Around April 15, Congress likes to pretend that the tax code just sort of appeared or [just] , Congress likes to pretend that the tax code just sort of appeared or [just] happened.happened. But the Constitution puts the burden of taxes solely, exclusively and entirely on But the Constitution puts the burden of taxes solely, exclusively and entirely on Congress’ Congress’ shoulders. The tax code is the way it is because a majority of Congress wants it that shoulders. The tax code is the way it is because a majority of Congress wants it that way.way. Source: “How the Tax Code Got This Way,” Source: “How the Tax Code Got This Way,” Denver Rocky Mountain News, April 16, 1999.Denver Rocky Mountain News, April 16, 1999.

Based on this passage, members of Congress probably like to Based on this passage, members of Congress probably like to pretend that the tax code just “sort of appeared” because theypretend that the tax code just “sort of appeared” because theya. are not happy with the code.a. are not happy with the code.b. don’t want voters to associate them with taxes.b. don’t want voters to associate them with taxes.c. feel the Internal Revenue Service does not administer taxes fairly.c. feel the Internal Revenue Service does not administer taxes fairly.d. cannot fix the unfairness in the tax code.d. cannot fix the unfairness in the tax code.

Mr. Weiss

Unit 565. 65. Every year at this timeEvery year at this time, Congress discovers, with a great public show of dismay and , Congress discovers, with a great public show of dismay and indignationindignation, the existence of the American tax code and the agency that administers it, the , the existence of the American tax code and the agency that administers it, the Internal Revenue Internal Revenue Service. There are high-minded calls for abolishing the current tax system Service. There are high-minded calls for abolishing the current tax system and replacing it....and replacing it....Around April 15Around April 15, Congress likes to pretend that the tax code just sort of appeared or [just] , Congress likes to pretend that the tax code just sort of appeared or [just] happened.happened. But the Constitution puts the burden of taxes solely, exclusively and entirely on But the Constitution puts the burden of taxes solely, exclusively and entirely on Congress’ Congress’ shoulders. The tax code is the way it is because a majority of Congress wants it that shoulders. The tax code is the way it is because a majority of Congress wants it that way.way. Source: “How the Tax Code Got This Way,” Source: “How the Tax Code Got This Way,” Denver Rocky Mountain News, April 16, 1999.Denver Rocky Mountain News, April 16, 1999.

Based on this passage, members of Congress probably like to Based on this passage, members of Congress probably like to pretend that the tax code just “sort of appeared” because theypretend that the tax code just “sort of appeared” because theya. are not happy with the code.a. are not happy with the code.b. don’t want voters to associate them with taxes.b. don’t want voters to associate them with taxes.c. feel the Internal Revenue Service does not administer taxes fairly.c. feel the Internal Revenue Service does not administer taxes fairly.d. cannot fix the unfairness in the tax code.d. cannot fix the unfairness in the tax code.

Mr. Weiss

Unit 5

70.70. Some people oppose government Some people oppose government assistance because they believe itassistance because they believe it

a. discourages personal responsibility.a. discourages personal responsibility.b. should be handled by large companies.b. should be handled by large companies.c. increases tax revenues.c. increases tax revenues.d. shields citizens from the harmful effects d. shields citizens from the harmful effects

of unemployment.of unemployment.

Mr. Weiss

Unit 5

70.70. Some people oppose government Some people oppose government assistance because they believe itassistance because they believe it

a. discourages personal responsibility.a. discourages personal responsibility.b. should be handled by large companies.b. should be handled by large companies.c. increases tax revenues.c. increases tax revenues.d. shields citizens from the harmful effects d. shields citizens from the harmful effects

of unemployment.of unemployment.

Mr. Weiss

Unit 5

75.75. Deficit financing isDeficit financing is

a.a. a type of proportional tax.a type of proportional tax.b.b. a public assistance program.a public assistance program.c.c. balanced budgeting.balanced budgeting.

d. government overspending.d. government overspending.

Mr. Weiss

Unit 5

75.75. Deficit financing isDeficit financing is

a.a. a type of proportional tax.a type of proportional tax.b.b. a public assistance program.a public assistance program.c.c. balanced budgeting.balanced budgeting.

d. government overspendingd. government overspending..

Mr. Weiss

Unit 5Back in 1940Back in 1940, when the Social Security program was just getting under way, average life , when the Social Security program was just getting under way, average life expectancy waexpectancy was less than 64 years. The program’s designers expected that most people would s less than 64 years. The program’s designers expected that most people would contribute to contribute to the program most of their lives and die before collecting a dime in retirement the program most of their lives and die before collecting a dime in retirement benefits.... benefits.... Today, average life expectancy in the United States is more than 75 years.... As life Today, average life expectancy in the United States is more than 75 years.... As life expectancy expectancy has soared, birthrates have declined, leaving fewer and fewer workers to support has soared, birthrates have declined, leaving fewer and fewer workers to support the ballooning the ballooning number of retirees. In 1950, [the system] was solidly supported with 16 workers number of retirees. In 1950, [the system] was solidly supported with 16 workers paying for paying for each retiree; today, there are just over three workers per beneficiary.each retiree; today, there are just over three workers per beneficiary.Source: Carrie Lips, Cato Institute’s Project on Social Security Privatization.Source: Carrie Lips, Cato Institute’s Project on Social Security Privatization.

80.80.According to the passage, the increase in average life expectancy has created a According to the passage, the increase in average life expectancy has created a problem for the Social Security system becauseproblem for the Social Security system because

a.a. people are remaining in the workforce longer.people are remaining in the workforce longer.b.b. more people are collecting retirement benefits for longer.more people are collecting retirement benefits for longer.c.c. younger workers are having a harder time finding jobs.younger workers are having a harder time finding jobs.d.d. people are retiring at a younger age.people are retiring at a younger age.

Mr. Weiss

Unit 5Back in 1940Back in 1940, when the Social Security program was just getting under way, average life , when the Social Security program was just getting under way, average life expectancy waexpectancy was less than 64 years. The program’s designers expected that most people would s less than 64 years. The program’s designers expected that most people would contribute to contribute to the program most of their lives and die before collecting a dime in retirement the program most of their lives and die before collecting a dime in retirement benefits.... benefits.... Today, average life expectancy in the United States is more than 75 years.... As life Today, average life expectancy in the United States is more than 75 years.... As life expectancy expectancy has soared, birthrates have declined, leaving fewer and fewer workers to support has soared, birthrates have declined, leaving fewer and fewer workers to support the ballooning the ballooning number of retirees. In 1950, [the system] was solidly supported with 16 workers number of retirees. In 1950, [the system] was solidly supported with 16 workers paying for paying for each retiree; today, there are just over three workers per beneficiary.each retiree; today, there are just over three workers per beneficiary.Source: Carrie Lips, Cato Institute’s Project on Social Security Privatization.Source: Carrie Lips, Cato Institute’s Project on Social Security Privatization.

80.80.According to the passage, the increase in average life expectancy has created a According to the passage, the increase in average life expectancy has created a problem for the Social Security system becauseproblem for the Social Security system because

a.a. people are remaining in the workforce longer.people are remaining in the workforce longer.b.b. more people are collecting retirement benefits for longer.more people are collecting retirement benefits for longer.c.c. younger workers are having a harder time finding jobs.younger workers are having a harder time finding jobs.d.d. people are retiring at a younger age.people are retiring at a younger age.

Mr. Weiss

Unit 5

85.85. Unemployment caused by up and down Unemployment caused by up and down fluctuations in the business cycle is fluctuations in the business cycle is calledcalled

a.a. cyclical unemployment.cyclical unemployment.b.b. structural unemploymentstructural unemploymentc.c. seasonal unemployment.seasonal unemployment.d. frictional unemployment.d. frictional unemployment.

Mr. Weiss

Unit 5

85.85. Unemployment caused by up and down Unemployment caused by up and down fluctuations in the business cycle is fluctuations in the business cycle is calledcalled

a.a. cyclical unemployment.cyclical unemployment.b.b. structural unemploymentstructural unemploymentc.c. seasonal unemployment.seasonal unemployment.d. frictional unemployment.d. frictional unemployment.

Mr. Weiss

Unit 5

90. 90. With economic With economic growth slowing, the unemployment rate would rise to between growth slowing, the unemployment rate would rise to between 4.8 percent 4.8 percent and 4.9 percent next year [which is] still low by historical standards. A and 4.9 percent next year [which is] still low by historical standards. A previous previous forecast estimated the unemployment rate next year would be about 4.75 forecast estimated the unemployment rate next year would be about 4.75 percent.percent. For all of last year, the jobless rate dipped to 4.6 percent, a six-year low. For all of last year, the jobless rate dipped to 4.6 percent, a six-year low.

The Fed The Fed said the "unemployment rate would increase modestly" in 2008, stabilize said the "unemployment rate would increase modestly" in 2008, stabilize in 2009 in 2009 and then decline slightly in 2010and then decline slightly in 2010. . Source: “Fed Forecasts Unemployment Bump in Source: “Fed Forecasts Unemployment Bump in

2008,”ABC News2008,”ABC News, Nov 20, 2007., Nov 20, 2007.

According to the passage, what was the highest projected level of According to the passage, what was the highest projected level of unemployment in 2008?unemployment in 2008?

a.a. 4.6 percent4.6 percent c.c. 4.8 percent4.8 percentb.b. 4.75 percent4.75 percent d.d. 4.9 percent4.9 percent

Mr. Weiss

Unit 5

90. 90. With economic With economic growth slowing, the unemployment rate would rise to between growth slowing, the unemployment rate would rise to between 4.8 percent 4.8 percent and 4.9 percent next year [which is] still low by historical standards. A and 4.9 percent next year [which is] still low by historical standards. A previous previous forecast estimated the unemployment rate next year would be about 4.75 forecast estimated the unemployment rate next year would be about 4.75 percent.percent. For all of last year, the jobless rate dipped to 4.6 percent, a six-year low. For all of last year, the jobless rate dipped to 4.6 percent, a six-year low.

The Fed The Fed said the "unemployment rate would increase modestly" in 2008, stabilize said the "unemployment rate would increase modestly" in 2008, stabilize in 2009 in 2009 and then decline slightly in 2010and then decline slightly in 2010. . Source: “Fed Forecasts Unemployment Bump in Source: “Fed Forecasts Unemployment Bump in

2008,”ABC News2008,”ABC News, Nov 20, 2007., Nov 20, 2007.

According to the passage, what was the highest projected level of According to the passage, what was the highest projected level of unemployment in 2008?unemployment in 2008?

a.a. 4.6 percent4.6 percent c.c. 4.8 percent4.8 percentb.b. 4.75 percent4.75 percent d.d. 4.9 percent4.9 percent

Mr. Weiss

Unit 5

95.95.The main weaknesses of using fiscal policy The main weaknesses of using fiscal policy to stabilize the economy areto stabilize the economy are

a.a. the underground economy and the underground economy and monetarism.monetarism.

b. high unemployment and stagflation.b. high unemployment and stagflation.c. the political process and time lags.c. the political process and time lags.d. misguided economists and stubborn d. misguided economists and stubborn

politicians.politicians.

Mr. Weiss

Unit 5

95.95.The main weaknesses of using fiscal policy The main weaknesses of using fiscal policy to stabilize the economy areto stabilize the economy are

a.a. the underground economy and the underground economy and monetarism.monetarism.

b. high unemployment and stagflation.b. high unemployment and stagflation.c. the political process and time lags.c. the political process and time lags.d. misguided economists and stubborn d. misguided economists and stubborn

politicians.politicians.

Mr. Weiss

Unit 5