Multiple Choice Questions

Lowering the discount rate can promote full employment because
  • By decreasing taxes and increasing spending
  • Fewer pricing plans and options for the consumer
  • companies are more likely to expand and hire more workers
  • A deficit results when more money is spent than is taken in; a surplus results when more money is taken in than is spent.
Which of these is the result of a government-regulated natural monopoly?
  • Increased taxesINCORRECT
  • Revenue equal to spending
  • Fewer pricing plans and options for the consumer
  • By decreasing taxes and increasing spending
Use this image to answer the following question. When the economy is operating at point B, the U.S. Congress is most likely to follow
  • contractionary monetary policy
  • Surplus
  • a shortage
  • The tools of the monetary policy promote full employment, price stability, and economic growth. The more money banks have to lend, the more businesses can expand. People will make frequent large purchases, like homes and cars. Business growth leads to jobs and people with jobs can make more purchases. An indicator of a growing economy is moderate inflation, which is good. However, the tools of the monetary policy, like discount rate and the reserve requirement, can promote price stability and prevent inflation from going out of control.Note: Discount rate is the minimum rate of interest. The Federal Reserve also requires the given percentage of total deposits.
Which is an example of a natural monopoly?
  • Fewer pricing plans and options for the consumer
  • management of the money supply
  • A single source for electricity in your community
  • the national debt is an accumulation of deficits.
Why do governments regulate natural monopolies?
  • By increasing taxes and decreasing spending
  • the national debt is an accumulation of deficits.
  • To prevent prices from rising too high and to increase efficiency
  • At that price, quantity demanded exceeds quantity supplied.
How are national debt and deficit related?
  • the national debt is an accumulation of deficits.
  • By decreasing taxes and increasing spending
  • There will be a shortage of Internet access.
  • By increasing taxes and decreasing spending
Unemployment is low and inflation is rising, but slowly. Gross Domestic Product is also rising. The Federal Reserve may increase the reserve requirement at this point in order to
  • protect the public from the potential of inflation rising out of control
  • Raise the income tax, which gives citizens less money to spend, and buy more services from civilian - owned businesses, which creates more jobs.
  • A deficit due to improving nationwide public transportation
  • At that price, quantity demanded exceeds quantity supplied.
Use this image to answer the following question. When government sets a price for a good above equilibrium, there will be
  • Surplus
  • expansion
  • a shortage
  • increase growth
The inflation rate is increasing and unemployment is decreasing. The economy is likely in
  • high inflation
  • Contraction
  • Peak production
  • expansion
In the 2000s, Venezuelan President Hugo Chàvez instituted economic policies that caused smuggling and hoarding of food. What did Chàvez do to create this behavior, and which zone (represented by a letter) on the graph represents the result?
  • contractionary monetary policy
  • The tools of the monetary policy promote full employment, price stability, and economic growth. The more money banks have to lend, the more businesses can expand. People will make frequent large purchases, like homes and cars. Business growth leads to jobs and people with jobs can make more purchases. An indicator of a growing economy is moderate inflation, which is good. However, the tools of the monetary policy, like discount rate and the reserve requirement, can promote price stability and prevent inflation from going out of control.Note: Discount rate is the minimum rate of interest. The Federal Reserve also requires the given percentage of total deposits.
  • Chàvez set a price ceiling (letter C), which resulted in quantity demanded exceeding quantity supplied for food.
  • Through appointments to the Board of Governors
in the diagram above, what will happen if the government sets the price for potatoes at point A?
  • There will be more wheat produced than demand requires.
  • There will be a shortage of Internet access.
  • There will be a surplus of potato
  • A deficit due to improving nationwide public transportation
How does the president most directly influence the Federal Reserve System?
  • Through appointments to the Board of Governors
  • contractionary monetary policy
  • Chàvez set a price ceiling (letter C), which resulted in quantity demanded exceeding quantity supplied for food.
  • The tools of the monetary policy promote full employment, price stability, and economic growth. The more money banks have to lend, the more businesses can expand. People will make frequent large purchases, like homes and cars. Business growth leads to jobs and people with jobs can make more purchases. An indicator of a growing economy is moderate inflation, which is good. However, the tools of the monetary policy, like discount rate and the reserve requirement, can promote price stability and prevent inflation from going out of control.Note: Discount rate is the minimum rate of interest. The Federal Reserve also requires the given percentage of total deposits.
Banks that are members of the Federal Reserve have the benefit of
  • earning dividends from stock in the Federal Reserve
  • companies are more likely to expand and hire more workers
  • Fewer pricing plans and options for the consumer
  • By negotiating affordable rates with the supplier
Use this image to answer the following question. When government sets a price for a good below equilibrium, there will be
  • a shortage
  • Peak production
  • Surplus
  • At that price, quantity demanded exceeds quantity supplied.
The government sets the price of subsidized corn too low. Which of the following statements describes the result?
  • There will be more wheat produced than demand requires.
  • To prevent prices from rising too high and to increase efficiency
  • By negotiating affordable rates with the supplier
  • At that price, quantity demanded exceeds quantity supplied.
The government sets the price of wheat for the coming year above the equilibrium price. What effect would this have on supply and demand?
  • At that price, quantity demanded exceeds quantity supplied.
  • There will be more wheat produced than demand requires.
  • There will be a surplus of workers.
  • There will be a shortage of Internet access.
From an Associated Press article on Venezuela dated January 22, 2008:"... troops are cracking down on the smuggling of food ... the National Guard has seized about 750 tons of food ... [President] Hugo Chàvez ordered the military to keep people from smuggling scarce items like milk ... He's also threatened to seize farms and milk plants ..."These actions were the result of a price ceiling on food. Which zone (represented by a letter) on the graph reflects this policy, and what does it create?
  • A deficit due to improving nationwide public transportation
  • the national debt is an accumulation of deficits.
  • Letter C; demand exceeds supply, resulting in a shortage
  • There will be more wheat produced than demand requires.
inflation is low but the unemployment rate is the highest seen in several years. Economists report signs that show in six months the economy is likely to improve. The economy is likely in
  • The banks are most likely to ask the Fed's to raise interest rates, sell bonds on the open market, and raise the reserve ratio in order to decrease inflation. So, there will be less money in the hands of the people and less spending, over all.
  • a shortage
  • trough
  • Contraction
Which of these could result from decreased federal spending?
  • Peak production
  • Increased taxesINCORRECT
  • Fewer social programs
  • Fewer pricing plans and options for the consumer
How does the U.S. government slow economic growth?
  • companies are more likely to expand and hire more workers
  • By negotiating affordable rates with the supplier
  • By increasing taxes and decreasing spending
  • Fewer pricing plans and options for the consumer
How do member banks of the Federal Reserve differ from other depository institutions?
  • A deficit due to improving nationwide public transportation
  • By negotiating affordable rates with the supplier
  • To prevent prices from rising too high and to increase efficiency
  • They are stockholders in their regional Federal Reserve Bank.
How does the U.S. government promote economic growth?
  • By negotiating affordable rates with the supplier
  • By decreasing taxes and increasing spending
  • companies are more likely to expand and hire more workers
  • Fewer pricing plans and options for the consumer
Look at the graph. Does zone A represent the result of a price ceiling or price floor, and which scenario is an example of these conditions?
  • A price floor and the large amount of corn stored in silos in the U.S. Midwest due to overproduction by farmers
  • By negotiating affordable rates with the supplier
  • There will be more wheat produced than demand requires.
  • A deficit results when more money is spent than is taken in; a surplus results when more money is taken in than is spent.
When the economy is operating at point C, the Federal Reserve may decrease the discount rate to
  • increase growth
  • Increased taxesINCORRECT
  • Peak production
  • Contraction
When a government spends more money in one year than it collects in taxes, there is a budget
  • increase growth
  • expansion
  • deficit
  • A deficit due to improving nationwide public transportation
The Federal Open Market Committee promotes price stability and economic growth through
  • There will be a surplus of potato
  • There will be a surplus of workers.
  • management of the money supply
  • A single source for electricity in your community
Some products are produced most efficiently when there is a single supplier. What is this called?
  • Contraction
  • deficitINCORRECT
  • Natural monopoly
  • Peak production
In the diagram above, what will happen if the government sets the price for Internet access at Point B?
  • There will be a shortage of Internet access.
  • A deficit due to improving nationwide public transportation
  • There will be a surplus of workers.
  • There will be more wheat produced than demand requires.
What is the difference between a deficit and a surplus?
  • A price floor and the large amount of corn stored in silos in the U.S. Midwest due to overproduction by farmers
  • A deficit results when more money is spent than is taken in; a surplus results when more money is taken in than is spent.
  • A deficit due to improving nationwide public transportation
  • companies are more likely to expand and hire more workers
Explain how the Federal Reserve may use the discount rate and the reserve requirement to increase the money supply. What impact should these actions have on employment and why?
  • There will be more wheat produced than demand requires.
  • contractionary monetary policy
  • The tools of the monetary policy promote full employment, price stability, and economic growth. The more money banks have to lend, the more businesses can expand. People will make frequent large purchases, like homes and cars. Business growth leads to jobs and people with jobs can make more purchases. An indicator of a growing economy is moderate inflation, which is good. However, the tools of the monetary policy, like discount rate and the reserve requirement, can promote price stability and prevent inflation from going out of control.Note: Discount rate is the minimum rate of interest. The Federal Reserve also requires the given percentage of total deposits.
  • The banks are most likely to ask the Fed's to raise interest rates, sell bonds on the open market, and raise the reserve ratio in order to decrease inflation. So, there will be less money in the hands of the people and less spending, over all.
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Multiple Choice Questions
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