question

The Required Reserve Ratio is 10 percent. The money multiplier is

answer

10.

question

All of the following are constitutional limits on the power to tax EXCEPT that

answer

exports must not be taxed.

question

How quickly can an increase in government spending increase the gross domestic product?

answer

6 months

question

What do taxes collected under the Federal Insurance Contribution Act (FICA) fund?

answer

Social Security and Medicare

question

The main source of funding for your school probably comes from

answer

local property taxes.

question

What is the cost of money?

answer

the price of the interest rate

question

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

answer

the consumer

question

What do Social Security taxes pay for?

answer

The benefits to older citizen, surviving family members of wage earners, and people with certain disabilities.

question

Which of the following is one way the Federal Reserve Bank serves the government?

answer

selling government securities

question

Suppose the required reserve ratio is 20 percent. A $5 million deposit allows commercial banks to create as much as

answer

$25 million

question

Why does a bank sometimes hold excess reserves?

answer

to be sure they can meet their customers' demands

question

The Laffer curve predicts the effects of changes in the tax rate on

answer

tax revenues.

question

The President has vetoed several appropriations bills. What is the next step in the budget process?

answer

Congress can vote to override the vetoes or pass new appropriations bills that the President is likely to sign.

question

When revenues exceed expenditures,

answer

there is a budget surplus.

question

How many Federal Reserve Districts are there?

answer

12

question

Your department store receipt says that you paid a 5% sales tax on sports equipment. This sales tax is an example of a

answer

regressive tax.

question

When you drive away from the gas pump, you have just paid a(n)

answer

excise tax.

question

Which of the following is one reason the federal government collects income taxes as a person earns?

answer

so that the government can pay bills as they come due

question

The most-used instrument for controlling week-to-week changes in the money supply is

answer

open market operations.

question

What happens to the money that your employer withholds from your paycheck?

answer

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

question

As commercial banks keep more excess reserves, money creation

answer

decreases.

question

What type of policy does the Federal Reserve use to counteract an expansion that is causing high interest rates?

answer

tight money policy

question

The purpose of expansionary fiscal policy is to

answer

increase output.

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What effect would an increase in the discount rate have on the money supply?

answer

It would cause the money supply to contract.

question

What is an entitlement?

answer

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

question

An accurate statement about achieving a balanced budget would be that

answer

most states require a balanced budget for state spending.

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

answer

Members of the Board of Governors disagree on the state of the economy and refuse to lower the discount rate until several months after a recession has begun.

question

Which of these is a contractionary fiscal policy?

answer

The President and Congress pass a new two-cent-per-gallon gasoline tax.

question

Which of the following is an example of state spending?

answer

all of the above

question

What is the major source of tax revenue for local governments?

answer

property taxes

question

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

answer

Income tax rates were reduced, but spending increased.

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Why does the Federal Reserve alter monetary policy?

answer

to lessen the effect of natural business cycles

question

Why makes increased government spending an effective tool for increasing demand?

answer

the multiplier effect

question

An example of contractionary fiscal policy would be

answer

decreasing government spending.

question

Congress has just passed several bills outlining the federal budget. What is the next step in the budget process?

answer

The President signs the budget into law or vetoes it and sends it back to Congress.

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All of the following are problems associated with high national debt EXCEPT that it

answer

makes investing in treasury bonds, notes, and bills very risky.

question

How did the Great Depression relate to the school of classical economics?

answer

The Great Depression appeared to disprove the classical theory that demand and supply could return to a healthy equilibrium through market forces alone.

question

All of the following are reasons why it is difficult to put balanced fiscal policy into practice EXCEPT

answer

the need for discretionary spending.

question

In contrast with classical economics, Keynesian economics

answer

takes a broader view of the economy.

question

If the money multiplier is 4, the required reserve ratio is

answer

25 percent.

question

All of the following are characteristics of classical economics EXCEPT

answer

a significant role for government in the running of the economy.

question

The sales tax on a $20.00 hammer is 7%, or $1.40. Why is this tax a bigger burden for Josh, who has a $15,000 income, than for Aaron, who has a $150,000 income?

answer

The tax represents a larger proportion of Josh's income.

question

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

answer

An operating budget is for day-to-day expenses; a capital budget is for investment spending.

question

What type of policy does the Fed use to counteract a contraction?

answer

easy money policy

question

Which is an example of discretionary spending?

answer

education

question

Supporters of supply-side economics believe that

answer

taxes have a strong negative influence on economic output.

question

Robin buys a newly-issues Treasury bond, Treasury note, and Treasury bill. Which will mature and be repaid by the government LAST?

answer

Treasury bond

question

The federal government's Fiscal Year 2007 begins on

answer

October 1, 2006.

question

What is one example of an automatic stabilizer?

answer

food stamps

question

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

answer

money spent on household expenses

question

Which of the following instruments is NOT used by the Federal Reserve to change the money supply?

answer

the federal tax code

question

Which of these situations is most likely to cause the Fed to introduce a tight money supply?

answer

The economy is expanding quickly and inflation is a concern.

question

The Office of Management and Budget

answer

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

question

An example of an automatic stabilizer is

answer

taxes.

question

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

answer

Franklin D. Roosevelt

question

What is one possible short-term effect of an easy money policy?

answer

increased investment spending

question

What does "lender of last resort" mean with respect to the Federal Reserve?

answer

It will lend money to a bank in a financial emergency.

question

Which of these tools in an example of monetary policy?

answer

changing reserve requirements

question

What was one reason the U.S. government started a Federal Reserve system?

answer

to provide consumers with access to funds for business expansion

question

Which of the following defines a means-tested program?

answer

Eligibility depends on income.

question

What leads directly to the crowding-out-effect?

answer

a big federal budget deficit

question

What will lead DIRECTLY to a government "shut down"?

answer

The President vetoes Congress's appropriations bills.

question

The national debt rose during Ronald Reagan's term as President for all of the following reasons EXCEPT

answer

the costs of running a war.

question

Suppose your total taxable income this year is $75,000. You 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

$15,000

question

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

answer

mandatory spending.

question

Which of these statements is a fundamental part of supply-side economics?

answer

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

question

How well did the Federal Reserve Banks perform during the Great Depression?

answer

Individual governors of the Federal Reserve Banks disagreed over policy and were unable to stop the depression.

question

When you buy a United States Savings Bond, you

answer

loan money to the government.

question

Keynesian economics failed to deal successfully with

answer

high inflation during the 1970s.

question

The federal budget is put together

answer

by Congress and the White House.

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