Exam: 04.07 Module Four Exam – Flashcards
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In the diagram above, what will happen if the government sets the price for potatoes at point A?
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There will be a surplus of potatoes.
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Lowering the discount rate can promote full employment because
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companies are more likely to expand and hire more workers
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In the diagram above, what will happen if the government sets the price for Internet access at Point B?
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There will be a shortage of Internet access.
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Why do governments regulate natural monopolies?
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To prevent prices from rising too high and to increase efficiency ???? maybe its not To prevent single suppliers from continuing to dominate a market
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How does the U.S. government slow economic growth?
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By increasing taxes and decreasing spending
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The Federal Open Market Committee promotes price stability and economic growth through
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management of the money supply
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The accumulation of years of spending more money than is collected in revenues over several years creates a budget
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Debt
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During a cold winter, there is a natural-gas shortage. The government sets a price ceiling on natural gas so that people can continue to afford heating. If the price ceiling remains in effect, what will happen?
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Quantity demanded will exceed the quantity supplied
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In the business cycle, when is "deflation" most likely to occur?
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During a recession
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Which of these is required to balance the budget for the year?
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Revenue equal to spending
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Which is an example of a natural monopoly?
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A single source for electricity in your community
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How are national debt and deficit related?
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The national debt is an accumulation of deficits.
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The Federal Reserve includes twelve
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regional banks
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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?
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Chàvez set a price ceiling (letter C), which resulted in quantity demanded exceeding quantity supplied for food.
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How does the government help ensure fair prices for all citizens of a particular area served by one utility company?
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By negotiating affordable rates with the supplier
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Which are more popular with citizens, contractionary or expansionary government actions, and why?
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Expansionary, because they increase the amount of money held by the people and put less in the hands of the government
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How does the president most directly influence the Federal Reserve System?
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Through appointments to the Board of Governors
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The inflation rate is decreasing and unemployment is rising. The economy is likely in
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Contractionary
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Inflation is skyrocketing, and prices are out of control. What are banks most likely to ask the Federal Reserve to do with regards to government bonds and reserve requirements? Be sure to explain why.
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If unemployment is high, the Fed may choose to buy government securities. This would increase the available money supply, increasing the purchasing power of businesses and individuals, stimulating the economy, which would in turn lower the unemployment rate.
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Use this image to answer the following question. In the business cycle phase marked A, economists expect
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economic growth to slow down
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Which actions would the Federal Reserve most likely take to slow inflation?
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Raise reserve requirement and sell government securities
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To promote economic growth, countries would most likely act so that inflation
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Remains at a low level ???
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How could government-sponsored grants for the private development of new technologies result in a lower national debt?
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Making initial development private saves the government from funding all of the research.
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The economy is in a severe recession. The government should
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increase spending
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Sales of new homes increased each month of the last year. The economy is likely in
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expansion
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The part of the Federal Reserve with the most impact on the money supply is the
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Federal Open Market Committee
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Unemployment is on the rise, though inflation is quite low. Gross Domestic Product is rising but more slowly than the goal rate. The Federal Reserve may buy government securities in open market operations in order to
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increase the money supply and encourage economic growth
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How does the government deal with a budget deficit?
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Increase taxes, sell bonds, and decrease spending
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Meetings of Federal Reserve officials occur in
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Washington, D.C.
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What role does government regulation serve in business?
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Protect consumers and producers
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Concerned that the size of the federal debt is stifling economic growth, citizen groups encourage Congress to tackle the issue with meaningful reform to the federal budget. Which actions are most likely to accomplish this goal?
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Increase taxation and decrease spending
