question

T/F Ceteris paribus is an economic law or principle

answer

FALSE

question

The first two digits of the ABA number on all checks are the: A) Account number B) Check number C) Federal reserve district number D) None of these

answer

Federal reserve district number

question

T/F We study economics because it'll give us a better understanding of the world we live in

answer

TRUE

question

T/F If the national debt keeps rising at the current rate we'll have to borrow money just to pay the interest

answer

TRUE

question

Which is NOT true of FICO scores A) It's used to determine the interest rate charged B) It may determine whether the bank will lend to a customer C) It is used to establish your credit rating D) FICO score of 400 is good

answer

FICO score of 400 is good

question

T/F In practicing economics people have to make trade-offs

answer

TRUE

question

T/F Governments can make decisions that can improve or worsen the economy

answer

TRUE

question

T/F Economic principle is a generalization

answer

TRUE

question

T/F A graphical expression is ceteris paribus

answer

FALSE

question

Utility value of a good or service is its A) Scarcity B) Opportunity cost C) Satisfaction

answer

Satisfaction

question

T/F Scarcity demands choice

answer

TRUE

question

T/F Marginal cost is defined as the change in cost of the next unit

answer

TRUE

question

T/F Macroeconomics is the study of economics in the aggregate

answer

TRUE

question

T/F Risk taking is a factor of production

answer

FALSE

question

T/F As a factor of production Land is a natural resource like water

answer

TRUE

question

If land, labor, and capital are fixed then ____ can move the production possibilities curve forward A) Entrepreneurial Ability B) Technology

answer

Technology

question

A production level below the production possibilities curve means there is A) Shortage B) Surplus C) Unemployment

answer

Unemployment

question

T/F When supply and demand are at equilibrium (the curves intersect) marginal benefit equals marginal cost

answer

TRUE

question

The law of increasing opportunity costs applies to the shape of the A) Demand curve B) Bell curve C) Production possibilities curve

answer

Production possibilities Curve

question

T/F Goods and services purchased outside the production possibilities curve can occur through international trade

answer

TRUE

question

T/F The formula for GDP is C + S + G = GDP

answer

FALSE

question

PPP refers to the method used to accurately compare different A) Currencies B) Economies C) Political systems

answer

Economies

question

In economics 'let it be' refers to a ___ economic system A) Market B) Command C) Pure capitalism

answer

Pure capitalism

question

T/F An economic system is needed to respond to the economizing problems

answer

TRUE

question

T/F China's economy is part command and part market system

answer

TRUE

question

T/F The great famine in China was due to a misallocation of resources

answer

TRUE

question

If the government owns most or all the resources it is a A) Command B) Capitalism C) Communist D) Market system

answer

Command

question

T/F China's misallocation of resources between farming and industry is a clear violation of production possibilities

answer

TRUE

question

T/F Private property is the most important aspect of capitalism

answer

TRUE

question

T/F Property rights extend to intellectual property by the issuing of patents and copyrights

answer

TRUE

question

T/F Other aspects of a market system includes Competition and Self Interest

answer

TRUE

question

T/F A medium of exchange is called money

answer

TRUE

question

"Buyers with dollar votes" is referred to as consumer A) Confidence B) Preference C) Sovereignty

answer

Preference

question

T/F The marketplace forces its own change with no government intervention

answer

TRUE

question

T/F All markets have in common supply, resources, price and quantity

answer

FALSE

question

T/F As the price of a product falls sales increase is part of the law of demand

answer

TRUE

question

The demand relationship between price and quantity is said to be A) Circular B) Inverse C) Direct

answer

Inverse

question

T/F As the price of a product falls demand will increase

answer

TRUE

question

T/F For demand there is a direct relationship between price and quantity

answer

FALSE

question

T/F The inverse relationship between price and quantity can be explained by Common Sense

answer

TRUE

question

The first box of chocolate chip cookies I consume will give more satisfaction than the second is the Law of Diminishing A) Satisfaction B) Quantity C) Marginal utility

answer

Marginal Utility

question

The normal demand curve is downward sloping and to the A) Right B) Left C) Vertical

answer

Right

question

Normal supply curve slopes up and to the A) Left B) Right C) Horizontal

answer

Right

question

T/F If supply and demand are at equilibrium then MB = MC

answer

TRUE

question

T/F A shift in demand is a movement along the demand curve

answer

FALSE

question

Market demand will increase with an increase in consumer: A) Satisfaction B) Income C) Taxes

answer

Income

question

The law of demand states that as price goes up demand will: A) Increase B) Decrease C) Not be affected

answer

Decrease

question

The law of supply states that as the price goes up producers will produce: A) Less B) More C) No change

answer

More

question

As the price declines quantities purchased will go up is the law of: A) Supply B) Demand C) Consumption D) Production

answer

Demand

question

As the price goes up quantities produced will also go up is the law of A) Demand B) Supply C) Marginal utility

answer

Supply

question

T/F Technology can cause a change in supply

answer

TRUE

question

T/F A change in the numbers of producers can cause a change in supply

answer

TRUE

question

T/F Supply side failures occur when the true cost of a product is not reflected in its price

answer

TRUE

question

T/F Supply side failures occur when products can't be produced and sold in the marketplace

answer

FALSE

question

T/F Supply side failures occur when products cannot be produced and/or sold in the marketplace

answer

FALSE

question

T/F Demand side failures occur when the true cost of the product isn't reflected in its price

answer

FALSE

question

T/F Supply side inefficiencies occurs when producers produce a surplus

answer

TRUE

question

T/F Supply side failure occurs when producers produce a shortage

answer

TRUE

question

T/F Demand side failure occurs when producers produce below the point of equilibrium

answer

FALSE

question

T/F The concept of Cap and Trade is an attempt by government to put a price on pollution

answer

TRUE

question

A Quasi-Public good would be: A) Medicare B) Social security C) Medicaid D) Traffic lights

answer

Traffic lights

question

T/F Consumer surplus is the difference between the equilibrium price and the highest price the consumer will pay

answer

TRUE

question

T/F Consumer surplus is the difference between the equilibrium price and the lowest price the consumer will pay

answer

FALSE

question

T/F Producer surplus is the difference between the equilibrium price and the highest price the consumers will pay

answer

FALSE

question

T/F Producer surplus is the difference between equilibrium price and the lowest price consumers will pay

answer

TRUE

question

T/F Unintended consequences in economics is usually associated with government action in the markets

answer

TRUE

question

T/F Governments establishing market prices can result in formation of black markets

answer

TRUE

question

T/F Price levels established by government often result in shortages or black markets

answer

TRUE

question

T/F Producers are inefficient when they produce above equilibrium

answer

TRUE

question

T/F Producers are inefficient when they produce below equilibrium

answer

TRUE

question

Producers are inefficient when they produce below equilibrium A) Shortage B) Surplus

answer

Shortage

question

If producers produce above equilibrium a ___ will result A) Shortage B) Surplus

answer

Surplus

question

T/F Public goods are goods produced by the consumer

answer

FALSE

question

T/F Public goods may not be paid for by those receiving them

answer

TRUE

question

Food stamps are an example of a ___ good A) Consumer B) Public

answer

Public

question

Requiring drivers to have a driver's license is an ___ externality A) Positive B) Dual C) Negative D) None of the above

answer

Positive

question

T/F Negative externalities would include CO2 emitting plants to buy credits to continue to emit CO2

answer

TRUE

question

T/F There is a strong possibility that by putting a price on CO2 emissions the consuming public may pay a higher price for electricity

answer

TRUE

question

T/F The recent economic recovery act in 2009 was well intended but spread too thin to be effective on the economy as a whole

answer

TRUE

question

T/F The economic recovery act of 2009 addressed long term projects and not the immediate need to create jobs for workers in housing and automobiles

answer

TRUE

question

T/F The impact of the Bush Administration's tax cuts in 2008 where less than effective partially because of the rise in the price of gas

answer

TRUE

question

T/F Government economic decisions are hampered by the absence of an invisible hand

answer

TRUE

question

T/F Poor economic government decisions can be caused by the actions of special interest groups

answer

TRUE

question

T/F "Earmarks" attached to legislation do not require a competitive bidding process

answer

TRUE

question

T/F "Earmarks" are sometimes referred to as "pork barrel politics"

answer

TRUE

question

T/F "Unfunded liabilities" refers to future government expenses that are currently provided for

answer

FALSE

question

T/F Government deficits occur when current tax revenues are less than current expenditures

answer

TRUE

question

T/F The Cash for Clunkers program was judged to be a success in that it jump started the automobile industry

answer

TRUE

question

T/F When the economy is operating at full employment tax revenues should more than cover governments operating expenses

answer

TRUE

question

T/F A tariff is a tax on what countries import

answer

TRUE

question

T/F A tariff is a tax on what countries export

answer

FALSE

question

Circle the incorrect answer: Key elements of macroeconomics is not A) Real GDP C) Employment D) Inflation E) Recession

answer

Inflation

question

T/F Inflation is the percentage change in prices year over year

answer

TRUE

question

T/F The Fed has jurisdiction over the investment banks prior to the Great Recession

answer

FALSE

question

T/F The SEC had jurisdiction over the commercial banks prior to the great recession

answer

TRUE

question

T/F Investors all over the world become a counterparty to the risk of the housing bubble burst in the the US

answer

FALSE

question

Moral hazards means that one party A) Has not disclosed the risk to the other B) Has provided misleading information C) Both of these D) None of these

answer

Both of these

question

T/F Glass-Steagall Law prevented commercial bank engaging in commercial banking activities

answer

FALSE

question

T/F The Glass-Steagall Law prevented investment banks for engaging in commercial banking activities

answer

TRUE

question

T/F The largest subprime lender was Countrywide

answer

TRUE

question

T/F Alternative A (Alt-A) loans allowed homeowners to take cash out of the equity of the homes

answer

TRUE

question

T/F A sub-prime mortgage has a 40 year duration with 20% down

answer

FALSE

question

T/F James Johnson (CEO of Fannie Mae) changed the metrics at Fannie Mae to earnings per share

answer

TRUE

question

T/F Countrywide's loan program "Fast-N-Easy" meant no documentation

answer

TRUE

question

T/F Alt-A loans allowed homeowners to take equity in the form of Cash out of their homes

answer

TRUE

question

T/F GSE's (Government Sponsored Entities) best describe the FHA

answer

FALSE

question

T/F Repeal of the Glass-Steagall act opened the door to lending abuses by Wall Street Investment firms and banks

answer

TRUE

question

T/F Periods of increasing GDP are growth periods

answer

TRUE

question

Periods of decreasing GDP are called A) Contractions B) Expansions

answer

Contractions

question

T/F The business cycle and economic cycle are on in the same

answer

TRUE

question

An increase in production can be caused by an increase in A) Suppliers B) Taxes C) Consumers

answer

Suppliers

question

T/F Equilibrium is the point where demand and supply met

answer

TRUE

question

Aggregate demand is the sum of consumption plus A) Savings B) Taxes C) Investment

answer

Investment

question

T/F The definition of PPP is Producers Parity Policy

answer

FALSE

question

T/F The three key elements of macroeconomics are GDP, unemployment, and recession

answer

FALSE

question

Which of the following is NOT a part of GDP A) Consumption B) Investment C) Savings D) Government Spending E) Net exports

answer

Savings

question

T/F The Law of Demand holds a direct relationship between price and quantity

answer

FALSE

question

T/F The Law of Supply holds an indirect relationship between price and quantity

answer

FALSE

question

T/F Economic Investment is an investment that consumers make to expand production capacity

answer

FALSE

question

T/F GDP = Consumption + Investment + Government + Net Exports

answer

TRUE

question

T/F Marginal cost is a movement along a supply curve

answer

TRUE

question

The correct factor of the production is A) Supply B) Demand C) Labor D) Production

answer

Labor

question

T/F As the price rises producers will produce more is known as the Law of Demand

answer

FALSE

question

Banks and other financial entities are known as A) Stock brokers B) Financial intermediaries C) Investment banks

answer

Financial intermediaries

question

Investments that cause business to expand productive capacity are known as ___ investments A) Commercial B) Consumer C) Capital

answer

Capital

question

The low point in the business cycle is known as the A) Peak B) Boom C) Recession

answer

Recession

question

T/F Price stickiness is a supply side problem

answer

TRUE

question

T/F Price stickiness and supply side shocks both cause short term disruptions in the economic growth

answer

TRUE

question

One regular aspect of the business cycle boom is the increasing rate of A) Saving B) Spending C) Income D) Inflation

answer

Inflation

question

T/F In the AD = AS model the AD curve slopes down

answer

TRUE

question

T/F Listed in order of phases of a complete business cycle are contraction, trough, peak, and expansion

answer

FALSE

question

T/F Large seasonal fluctuations show up in the GDP data

answer

FALSE

question

T/F In Economics during a boom period governments are required to spend, and save during a recession

answer

FALSE

question

Surplus of products is an excess of A) Supply B) Demand

answer

Supply

question

T/F The three keys of Macroeconomics are GDP, unemployment, and inflation

answer

FALSE

question

Disposable income is defined as consumption plus A) Income B) Salary C) Savings D) Profit

answer

Savings

question

T/F Intermediate goods are a part of the consumption calculation

answer

FALSE

question

T/F Non-product goods are included in GDP calculations

answer

FALSE

question

Final goods are goods purchased for A) Disposal B) Consumption C) Recycle

answer

Consumption

question

T/F The expanded formula for GDP is C + Ig + G + En

answer

FALSE

question

In economics a non-durable good has a useful life of less than A) One year B) Four years C) Three years

answer

Three years

question

In economics durable goods are defined as having a useful life of more than A) Ten years B) Five years C) Three years D) Seven years

answer

Three years

question

Service account for ___ of consumption in the U.S. A) 10% B) 30% C) 60% D) 70%

answer

60%

question

T/F The change in inventories is part of the Ig (Gross investment) calculation

answer

TRUE

question

T/F Net investment includes a deduction for depreciation

answer

TRUE

question

T/F Government transfer payments are included in the GDP formula

answer

FALSE

question

T/F Food stamps are included in Government Purchases

answer

FALSE

question

T/F Government purchases would include Federal, State, and Local government

answer

TRUE

question

T/F Net Exports were added to the formula to standardize the measurement of GDP from country to country

answer

TRUE

question

Extensive comparisons of economies around the world are published by the A) IMF B) WTO C) FIFA D) Federal Reserve

answer

WTO

question

Which is one of the factors of production A) Supply B) Demand C) Labor D) Price or quantity

answer

Labor

question

The highest GDP in the world at treaded exchange rates is the US, and the next highest is A) Japan B) China C) Germany

answer

China

question

Consumption accounts for ___ of the US GDP formula A) 50% B) 60% C) 40% D) 70%

answer

70%

question

T/F Disposable income is equal to Consumption plus Savings

answer

TRUE

question

The Income Approach is one method of calculating A) Investment B) Consumption C) Exports D) GDP

answer

GDP

question

T/F The GDP figures published by the government are NOT adjusted for inflation

answer

FALSE

question

T/F The expanded GDP formula is C + Ig + G + Xn

answer

TRUE

question

One of the main reasons for the growth in the US has been the A) Increase of imports B) Increase of exports C) Technology

answer

Technology

question

T/F In the business cycle a period of expansion is marked by increased GDP and unemployment

answer

FALSE

question

Declining GDP, employment, and income leads to a ___ in the business cycle A) Increase B) Decrease C) Inflation

answer

Decrease

question

T/F Monetary policy can cause changes in the business cycle

answer

TRUE

question

T/F The stock market tends to be a leading indicator of changes in the business cycle

answer

TRUE

question

Workers out of work due to a job change are called ___ unemployment A) Structural B) Seasonal C) Frictional

answer

Frictional

question

T/F Cost push inflation is caused by increased prices of raw materials and decreases in aggregate supply

answer

TRUE

question

T/F The marginal propensity to save is calculated by dividing consumption by savings

answer

TRUE

question

T/F Economic stability or instability impacts consumption and savings decisions by consumers

answer

TRUE

question

T/F An increase in consumption will have a multiplier effect

answer

TRUE

question

T/F Unemployment statistics NRU refers to the Natural Rate of Employment

answer

TRUE

question

T/F Okun's Law states that for every 1% the natural rate is exceeded by the actual unemployment rate a negative GDP gap of about 2% occurs

answer

TRUE

question

T/F Unemployment means idleness and that means loss of self respect

answer

TRUE

question

The stock market is considered a ___ indicator for changes in the business cycle A) Leading B) Lagging

answer

Leading

question

T/F The Federal Reserve is managed by the US treasury

answer

FALSE

question

T/F Federal Reserve member bank vote on all major policy issues

answer

FALSE

question

T/F The Federal Reserve is subject to congressional oversight

answer

TRUE

question

T/F The Federal Reserve prints all the US currency

answer

FALSE

question

T/F The President and vice president of the federal reserve are appointed by the federal reserve board

answer

FALSE

question

T/F The three types of unemployment are Cyclical, Structural, and Frictional

answer

TRUE

question

T/F The equation for determining the unemployment rate is the labor force divided by the unemployed times 100

answer

FALSE

question

Workers in lower skilled jobs generally have ___ unemployment rate A) Lower B) Higher C) Average

answer

Higher

question

T/F In economics "marginal" means increased

answer

FALSE

question

T/F The MPC equals the change in consumption divided by the change in disposable income

answer

TRUE

question

T/F The higher the marginal propensity to consume the greater the economy

answer

TRUE

question

T/F Economic stability has an impact on the Marginal Propensity to Consume

answer

TRUE

question

T/F The Federal Open Market Committee really sets the Federal Reserve monetary policy

answer

TRUE

question

T/F The structure of the Federal Reserve is considered unique for a central bank

answer

TRUE

question

T/F The member banks of the federal reserve own stock and vote for the chairman

answer

FALSE

question

The federal reserve turns its income over to A) The US congress B) Treasury C) Homeland Security D)Pentagon

answer

Treasury

question

T/F To control the business cycle the US government has two methods: Fiscal policy and Monetary policy

answer

TRUE

question

T/F The money multiplier effect occurs because banks in total can lend out more than they take in

answer

TRUE

question

The fiscal multiplier relies on the marginal propensity to A) Save B) Consume

answer

Consume

question

T/F During the Great Depression Roosevelt founded the Civilian Conservation Corp to hire unemployed workers to work on public projects

answer

TRUE

question

T/F Supply side economics assumed workers would accept lower wages to stay employed

answer

TRUE

question

T/F John Maynard Keynes was a supply side economist

answer

FALSE

question

T/F "Says Law" pertains to the slope of the demand curve

answer

FALSE

question

Say's law = Supply creates its own A) Supply B) Employment C) Demand

answer

Demand

question

T/F Keynesian economics holds that government spending can be used to stimulate the economy

answer

TRUE

question

Keynes argued that the ___ drove full employment A) Supply curve B) Bell curve C) Demand curve

answer

Demand curve

question

T/F For an economy to be in equilibrium aggregate demand must equal supply

answer

TRUE

question

T/F Keynesian economists hold that government spending can moderate boom/bust economic cycles

answer

TRUE

question

Keynesian economics changed the GDP formula by adding A) Consumption B) Investment C) Exports D) Government spending

answer

Government spending

question

T/F A recent example of the application of Keynesian economics is economic recovery act (ARRA) passed by the Obama Administration

answer

TRUE

question

Priming the pump is a ___ economic concept A) Supply B) Demand

answer

Demand

question

T/F Budget deficits are the direct result of Keynesian economic principles

answer

FALSE

question

T/F John Maynard Keynes wrote what is commonly known as the Bible of Macroeconomics

answer

TRUE

question

T/F Supply side economists believed that supply created its own demand

answer

TRUE

question

T/F Keynesian economists argued that supply creates its own demand

answer

FALSE

question

T/F In the Keynesian private/closed economic model the GDP is equal to Consumption plus Gross Investment

answer

TRUE

question

In the Keynesian private/closed economic model the Savings must equal ___ at equilibrium A) Consumption B) Taxes C) Investment

answer

Investment

question

For Keynes's private/closed eocnomic model government can only spend on goods and services what they collect in A) Food stamps B) Taxes C) Treasury bonds D) Social security

answer

Taxes

question

T/F Xn = X - I = 0 is an assumption on the Keynesian closed economic model

answer

TRUE

question

T/F Leakages and Unplanned Changes in inventory always occurred in Keynes's closed economic model

answer

FALSE

question

The aggregate demand curve is downward sloping and to the A) Right B) Left C) Vertical D) Horizontal

answer

Right

question

The aggregate supply curve is upward sloping and to the A) Right B) Left C) Vertical D) Horizontal

answer

RIGHT

question

T/F Consumer spending is affected by consumer expectations and consumer income

answer

TRUE

question

T/F An increase in taxes can cause a change in consumer spending

answer

TRUE

question

T/F Consumer spending is affected by household borrowing

answer

TRUE

question

The prime rate is a benchmark rate that banks use to determine the A) Loan B) Fed funds C) Discount rate D) Interest rate

answer

Interest rate

question

T/F Buying securities by the Fed puts money in the economy

answer

TRUE

question

If the Fed raises the reserve ratio money supply will probably A) Increase B) Decrease C) Stay the same

answer

Decrease

question

T/F The discount rate is the rate the Fed charges the US Treasury

answer

FALSE

question

T/F Business investment spending is influenced by expectations about future business, technology, and degree of excess capacity

answer

TRUE

question

An ageing population will cause the labor supply to A) Increase B) Decrease C) Stay the same

answer

Decrease

question

T/F In fiscal policy the government has two tools and its disposal increased or decreased spending and taxes

answer

TRUE

question

T/F In trying to manage the business cycle the government has two tools at its disposal increased or decreased spending and taxes

answer

FALSE

question

T/F The public debt is the debt owed by the US to foreigners

answer

FALSE

question

T/F The national debt includes debt owed by state and local government

answer

FALSE

question

T/F Economist Paul Krugman concluded that we have at least 89 cents of every dollar we owe other countries is covered by what they owe us

answer

TRUE

question

T/F Intra-government debt is mostly food stamps

answer

FALSE

question

T/F HJ Aron concluded that if we collected all the taxes that were owed we could cover the deficit

answer

TRUE

question

T/F Prime rate is set by the Fed

answer

FALSE

question

T/F The Fed uses the CPI (Consumer Price Index) to measure inflation

answer

FALSE

question

T/F The national debt includes treasury securities in the social security trust fund

answer

TRUE

question

T/F the national debt and the deficit are the same

answer

FALSE

question

T/F The CBO concluded that continued deficits could lead to lower taxes

answer

FALSE

question

T/F Intra-government debt is mostly social security and Medicare

answer

TRUE

question

T/F Governmental unfunded obligations are due and payable now

answer

FALSE

question

T/F The Social Security System in the US maintains individual accounts for all employees

answer

FALSE

question

T/F The Social Security System is a "pay as you go system"

answer

TRUE

question

T/F The Social Security Trust Fund bonds are traded on the Bond Market

answer

FALSE

question

The social security shortfall problem probably can be helped by A) Raising retirement age B) Selling more treasury bonds C) Raising the interest rate

answer

Raising retirement age

question

T/F The primary rate is the inter-bank lending rate

answer

FALSE

question

The Fed Funds rate is generally ___ less than the prime rate A) 10% B) 5% C) 3%

answer

3%

question

T/F The current Prime Rate less than 1%

answer

FALSE

question

T/F With unemployment and recession the Fed will decrease the money supply

answer

FALSE

question

With inflation the Fed will probably ___ the money supply A) Increase B) Decrease

answer

Decrease

question

T/F Federal Reserve Monetary Policy tools include bond buying

answer

TRUE

question

In periods of inflation the Fed wants the money supply to A) Raise B) Fall

answer

Fall

question

During a recession the Fed will probably A) Buy bonds B) Sell bonds C) Do nothing

answer

Buy bonds

question

T/F To fight inflation the Fed will probably raise the discount rate

answer

TRUE

question

Circle the one that is not a commercial bank A) Deutsche Bank B) Wells Fargo C) Bank of America D) Citibank

answer

Deutsche Bank

question

T/F Prudential is a mutual fund company

answer

Don't worry about it

question

T/F TIAA-CREF is a security company

answer

Don't worry about it

question

T/F Commercial Banks create money through their deposit/lending function

answer

TRUE

question

T/F The two goals of any commercial bank are Liquidity and Profitability

answer

TRUE

question

The US dollar is backed by A) Gold B) Silver C) Diamond D) The full faith and credit of the US

answer

The full faith and credit of the US

question

T/F The gold standard for the world's currencies did not work because of international trade

answer

TRUE

question

T/F President Nixon took the US off the Silver standard

answer

TRUE

question

T/F M1 is the broader measure of the money supply

answer

FALSE

question

T/F M1 consists of currency in circulation and checking accounts in bankS

answer

TRUE

question

T/F Money functions as a unit of account, medium of exchange, and a store of value

answer

TRUE

question

T/F The acceptability of money is because of the long standing business practice and confidence in that it can be exchanged for real goods and services

answer

TRUE

question

Currency is legal tender because of A) The stock market B) The bond market C) The government said so D) None of these

answer

The government said so

question

T/F The value of money is derived from its scarcity relative to its utility

answer

FALSE

question

When the purchasing power of our money goes up we are experiencing A) Inflation B) Economic expansion C) Growth D) Deflation

answer

Deflation

question

The Federal Reserve is unique in that it A) Prints money B) Collects taxes C) Is the treasury D) None of these

answer

None of these

question

T/F TARP was the bank bailout program by Congress

answer

TRUE

question

Which is not a Federal Reserve function A) Printing money B) Lender of last resort C) Setting Fed Funds rate D) All of these

answer

Printing money

question

T/F The financial crisis resulted in a few large banks becoming larger

answer

TRUE

question

T/F The Financial Crisis Inquiry Commission in the minority report also laid blame on the GSE's

answer

TRUE

question

T/F The Financial Crisis Inquiry Commission concluded that even the Federal Reserve made mistakes

answer

TRUE

question

T/F TARP was the governmental program to rescue the banks during the financial crisis of 2008

answer

TRUE

question

T/F The three people tasked with fixing the financial crisis on Wall Street were Geithner, Bernanke, and Bush

answer

FALSE

question

T/F The money multiplier refers to the deposit and lending function of commercial banks

answer

TRUE

question

T/F Levels of output, employment, income, and prices are all affected by aggregate demand

answer

TRUE

question

T/F Aggregate demand is directly affected by input prices, productivity, and legal/institutional environment

answer

FALSE

question

T/F Aggregate demand is a combination of Consumption, Investment, Net export spending and Government spending

answer

TRUE

question

T/F Investment "Ig" is directly affected by the interest rate and the anticipated rate of return

answer

TRUE

question

T/F Exchange rates affect only exports

answer

FALSE

question

T/F Productivity is affected by education, technology, and the quantity of capital

answer

TRUE

question

T/F ZIRP stands for Zero Investment Return Policy

answer

FALSE

question

T/F QE stands for Quantitative Easing

answer

TRUE

question

TWIST is the Fed selling short term bonds and buying ___ bonds A) Long term B) Short term

answer

Long term

question

T/F All common stocks pay dividends

answer

FALSE

question

T/F In bankruptcy common stock holders will get their investment returned

answer

FALSE

question

T/F Common Stocks always make interest payments semi-annually

answer

FALSE

question

T/F A common stock is a certificate of ownership

answer

TRUE

question

T/F Capital Gains tax is a tax on Investments sold after more than one year

answer

TRUE

question

Ordinary tax rates apply to the sale of a stock at profit if it is held for ___ one year A) Less than B) More than

answer

Less than

question

T/F Ordinary tax rates apply to the sale of a stock at a profit if held for more than one year

answer

FALSE

question

T/F A bond is a debt instrument that generally has a face value of $1,000 and pays interest semiannually

answer

TRUE

question

T/F In the event of bankruptcy bondholders will be the last to suffer a loss

answer

TRUE

question

T/F Municipal Bonds generally have an exemption from federal income tax

answer

TRUE

question

Investment grade bonds are any bond rated BBB and A) Below B) Above

answer

Above

question

T/F A demand deposit at a bank is a checking account

answer

TRUE

question

T/F Preferred stock conveys ownership and has voting rights

answer

FALSE

question

T/F The value of a Mutual Fund is determined as it trades during the day on the NYSE

answer

FALSE

question

T/F ETF's (Exchange Trade Funds) are designed to mirror the index they track

answer

TRUE

question

One advantage of the ETF's are that they act like a mutual fund but are ___ the cost of a mutual fund A) Less than B) More than C) Same

answer

Less than

question

T/F The NASDAQ stock exchange is known as the "Big Board"

answer

FALSE

question

If the price of gasoline goes down this is an increase in A) Income B) Savings C) Purchasing power

answer

Purchasing power

question

T/F If the price of gasoline goes up this is a decrease in income

answer

FALSE

question

T/F If the price of gasoline goes down this is an increase in Disposable Income

answer

FALSE

question

In the Aggregate Demand and Supply chart at equilibrium, long term aggregate demand equals long term aggregate supply and equals short term aggregate A) Demand B) Supply

answer

Supply

question

T/F Short run aggregate supply curve is upward sloping and to the right

answer

TRUE

question

The economy can respond to short increases in demand at full employment by increasing A) Number of workers B) Number of working hours

answer

Number of working hours

question

At full employment the long run aggregate supply curve is A) Vertical B) Horizontal C) Downard sloping D) Curved

answer

Vertical

question

In the long run if aggregate prices increase the result will be A) Inflationary B) Deflationary

answer

Inflationary

question

T/F In long term equilibrium at full employment only frictional or natural unemployment can exist

answer

TRUE

question

Demand pull inflation shifts the ___ curve upward A) Supply B) Demand

answer

Demand

question

T/F Cost push inflation is usually caused by a shock to the economy

answer

TRUE

question

The OPEC oil embargo in 1973 is an example of ___ inflation A) Cost push B) Cost demand C) Pull

answer

Cost push

question

T/F Long run supply problems are not easily or quickly fixed

answer

TRUE

question

T/F In a stagflation economy the economy is not growing or shrinking and deflation is occurring at the same time

answer

False

question

From 1929 to 1933 both Aggregate Demand and Aggregate supply A) Rose B) Fell

answer

Fell

question

The Phillips Curve maintained that the relationship between inflation and unemployment was A) Direct B) Inverse C) Similar

answer

Inverse

question

The Laffer Curve maintained that there is a point beyond which an increase in the tax rate will produce more tax revenue

answer

FALSE

question

T/F One basis for international trade is that technologies differ between counties

answer

TRUE

question

T/F A products appeal may be a basis for international trade

answer

TRUE

question

T/F Comparative Advantage favors the lowest cost production

answer

TRUE

question

The nation with lowest opportunity cost (marginal cost) for a product will probably be the net A) Importer B) Exporter

answer

Exporter

question

T/F Globalization is the integration of economies through trade and tariffs

answer

TRUE

question

T/F Ease and efficiency of transportation has contributed to the rise of Globalization

answer

TRUE

question

T/F Critics argue that globalization has contributed to the demise of nation states

answer

TRUE

question

T/F Critics of globalization argue that it contributes to the destruction of the environment

answer

TRUE

question

T/F As a result of globalization critics maintain that the gulf between rich and poor countries get worse

answer

TRUE

question

T/F High income countries tend to trade less because they are more self-sufficient

answer

FALSE

question

T/F Cultural differences between countries are a barrier to international trade

answer

TRUE

question

T/F Trade barriers include tariffs, quotas, and export subsidies

answer

TRUE

question

T/F The biggest reason for a country not to put up tariffs as trade barriers is retaliation

answer

TRUE

question

T/F Protectionism is the opposite of foreign trade

answer

TRUE

question

T/F In developing countries only capital is missing from the four factors of production

answer

TRUE

question

The World Bank is charged with eliminating A) Trade barriers B) Capital flow C) Poverty

answer

Poverty

question

T/F Sub-Sahara has the highest poverty level in the world

answer

TRUE

question

The factors of production that are missing in most developing countries are A) Land and Labor B) Land and Entrepreneurial ability C) Labor and Capital D) Capital and Entrepreneurial ability

answer

Capital and Entrepreneurial ability

question

T/F The multilateral organizations would include the IMF, World bank, and the Federal Reserve

answer

FALSE

question

T/F The World Bank deals with capital flows throughout the world

answer

FALSE

question

T/F the IMF is primarily concerned with financial issues in member countries

answer

TRUE

question

T/F The World Bank was originally founded to rebuild war torn Europe after the Second World War

answer

TRUE

question

T/F The International Development Bank makes loans to developing countries

answer

TRUE

question

T/F The US has the biggest voting power at the World Bank

answer

TRUE

question

T/F Politically the World Bank must meet the demands of the donor and borrowing governments

answer

TRUE

question

T/F The US is the only single member that can block a supermajority vote at the IMF

answer

TRUE

question

T/F The World Bank works on Macroeconomic issues where the IMF works on Microeconomic issues

answer

FALSE

question

T/F Where the IMF gives out money it also gives out advice on taxes and spending in the receiving country

answer

TRUE

question

T/F Where the Fed is the central bank for the US the IMF is the central bank of the world

answer

TRUE

question

T/F The World Bank is setup to handle world trade disputes

answer

FALSE

question

T/F The World Trade Organization was created under the GATT Treaty

answer

TRUE

question

WTO (World Trade Organization) provides for special and differential treatment for ___ countries A) Industrialized B) Developing

answer

Developing

question

T/F WTO provides trading countries with a forum for negotiations and settling disputes

answer

TRUE

question

T/F Trade deficits occur when exports exceed imports

answer

FALSE

question

T/F The sum of all the Balance of Payments accounts must always equal 0

answer

TRUE

question

T/F The primary purpose of the foreign exchange market (Forex) is to assist international trade and currency conversion

answer

TRUE

question

T/F One of the reasons for the growth of foreign exchange trading has been technology

answer

TRUE

question

The number one traded currency in the world is the A) Pound B) Sterling C) Dollar D) Yen E) Yuan

answer

Dollar

question

T/F Three major foreign exchange policies countries follow are fixed, floating, and soft peg

answer

TRUE

question

T/F Macroeconomic factors that affects exchange rates include governmental fiscal and monetary policies

answer

TRUE

question

A production level below the production possibilities curve means there is A) Shortage B) Surplus C) Unemployment D) None of these

answer

Unemployment

question

Which is NOT true of FICO scores A) It is used to determine the interest rate charged B) It may determine whether the bank will lend to a customer C) It is used to establish your credit rating D)A FICO score of 400 is good

answer

A FICO score of 400 is good

question

If land, labor, and capital are fixed, then ___ can move the production possibilities curve outward A) Entrepreneurial ability B) Technology C) Imports D) Exports

answer

Technology

question

PPP refers to the method used to accurately compare different: A) Currencies B) Economies C) Political systems D) None of these

answer

Economies

question

Utility value of a good or service is its: A) Scarcity B) Opportunity cost C) Satisfaction D) All of these

answer

Satisfaction

question

T/F goods and services purchased outside the production possibilities curve can occur through international trade

answer

TRUE

question

T/F Scarcity demands a choice

answer

TRUE

question

T/F The formula for GDP is: C + S + G = GDP

answer

FALSE

question

T/F We study economics because it will give us a better understanding of the world we live in

answer

TRUE

question

T/F In practicing economies people have to make trade-offs

answer

TRUE

question

A production level below the production possibilities curve mans there is A) Shortage B) Surplus C) Unemployment D) None of these

answer

Unemployment

question

If land, labor, and capital are fixed then ___ can move the production possibilities curve outwards A) Entrepreneurial ability B) Technology C) All of these D) None of these

answer

Technology

question

If the government owns most or all of the resources it is a ___ system A) Command B) Capitalism C) Communism D) Market

answer

Command

question

In economics "Let it be" refers to a ___ system A) Market B) Command C) Pure capitalism D) Socialistic

answer

Pure capitalism

question

PPP refers to the method used to accurately compare different A) Currencies B) Economies C) Political systems D) None of these

answer

Economies

question

T/F A nation will import those goods in which it has a comparative advantage

answer

FALSE

question

T/F All markets have in common supply, resources, price, and quantity

answer

FALSE

question

T/F China's misallocation of resources between farming and industry is a clear violation of production possibilities

answer

TRUE

question

T/F Comparative advantage and absolute advantage are the same

answer

FALSE

question

T/F Other aspects of a market system include competition and self interest

answer

TRUE

question

T/F Private property is the most important aspect of Capitalism

answer

TRUE

question

T/F Technology cannot cause a change in supply

answer

FALSE

question

T/F Today China's economy today is part command and part market system

answer

TRUE

question

As the price goes up quantity will also go up is the law of A) Demand B) Supply C) Marginal utility D) None of these

answer

Supply

question

Market demand will increase with an increase in consumer A) Satisfaction B) Income C) Taxes D) Production

answer

Income

question

The normal demand curve is downward sloping and to the A) Right B) Left C) Vertical D) Horizontal

answer

Right

question

The short run supply curve normally slopes up and to the A) Left B) Right C) Horizontal D) Vertical

answer

Right

question

T/F A change in the number of producers can cause a change in supply

answer

TRUE

question

T/F The marketplace forces its own changes with no government intervention

answer

TRUE

question

T/F In a recession as income fall the quantity of inferior goods purchased goes down

answer

FALSE

question

T/F The discovery of a new oil field will probably cause the price of gasoline to fall

answer

TRUE

question

T/F In the past 50 years the cost of computer chips has fallen dramatically and the demand for computers has risen

answer

TRUE

question

If producers produce above equilibrium a ___ will result A) Shortage B) Surplus C) All of these D) None of these

answer

Surplus

question

Elasticity of demand refers to A) Shift in demand curve B) Movement along the demand curve C) All of these D) None of these

answer

Movement along the demand curve

question

Food stamps are an example of A) Consumer good B) Public good C) Poor good D) No good

answer

Public good

question

The Laffer Curve illustrates that the government can in some cases A) Increase the deadweight loss B) Increase the government's tax revenue C) All of these D) None of these

answer

Increase the government's tax revenue

question

A sales tax has the effect of A) Lowering the price to the consumer B) Raising the revenue to the producer C) All of these D) None of these

answer

None of these

question

T/F Elasticity of demand may be high if there are few substitutes

answer

FALSE

question

T/F Demand side failures occur when the true cost of the product is an invisible hand

answer

FALSE

question

T/F Producer surplus is the difference between the equilibrium price and the highest price the consumer will pay

answer

FALSE

question

T/F The fall of total surplus for consumers and producers is the deadweight loss due to the imposition of a sales tax

answer

TRUE

question

T/F Supply side failure occurs when producers produce a surplus

answer

TRUE

question

Disposable income is defined as consumption plus A) Income B) Salary C) Savings D) Profit

answer

Savings

question

Final goods are goods purchased for A) Disposal B) Consumption C) Recycle D) Return

answer

Consumption

question

The largest single component of US GDP is A) Investment B) Net Imports C) Consumption D) None of these

answer

Consumption

question

T/F Social Security payments are a part of the GDP formula

answer

FALSE

question

T/F The implementation of tariffs is imports tend to decrease the domestic supply

answer

FALSE

question

T/F Non-production goods are included in GDP calculations

answer

FALSE

question

T/F intermediate goods are part of the Consumption calculation

answer

FALSE

question

T/F Economic Investment is an investment in the stock market

answer

FALSE

question

T/F Net exports were added to the formula to standardize the measurement of GDP from country to country

answer

TRUE

question

T/F The world trade organization is responsible for reducing worldwide poverty

answer

FALSE

question

The Rule of 70 would mean that at 3% interest the amount saved would double in ___ years A) 11 B) 16 C) 19 D) 23

answer

23

question

One advantage of ETF's are that they act like a mutual fund but are ___ the cost of a mutual fund A) Less than B) More than C) The same as D) None of these

answer

Less than

question

Holders of municipal bonds pay ___ tax rates A) Capital gains B) Ordinary income C) Excise tax D) None of these

answer

None of these

question

Public savings is A) The amount households have after paying al taxes and expenditure B) Excess of tax income over expenditure C) Budget deficit D) All of these

answer

Excess of tax income over expenditure

question

An investor over 65 years old would normally have ___ portfolio A) Aggressive B) Balanced C) Conservative D) None of these

answer

Conservative

question

T/F Present value calculations are really the reverse of compounding

answer

TRUE

question

T/F ETF's (Exchange Traded Funds) are designed to mirror the index they track

answer

TRUE

question

Declining GDP, Income, and Employment represents A) Peak B) Recovery C) Recession D) All of these

answer

Recession

question

Long term unemployment often means A) Workers drop out of the workforce B) May have to accept part time work C) Become more difficult to find work D) All of these

answer

All of these

question

Some argue that social benefit programs lead to decreased employment includes all but A) Food stamps B) Increased consumption and investment C) Social security D) Unemployment benefits

answer

Increased consumption and investment

question

Workers between jobs are ___ unemployed A) Structurally B) Seasonally C) Cyclically D) Frictionally

answer

Frictionally

question

Business cycles can be caused by A) Monetary policy B) Irregular innovation C) Political events D) All of these

answer

all of these

question

T/F Structural unemployment can be debilitating

answer

TRUE

question

T/F Labor force participation rate is the total labor force

answer

FALSE

question

T/F Collective bargaining allowed unions to negotiate with companies and governments

answer

TRUE

question

T/F Producers Purchasing Index measures consumer prices

answer

FALSE

question

T/F Inflation hurts debtors

answer

FALSE

question

T/F Deflation can make a recession worse

answer

TRUE

question

T/F Unemployment is a lagging indicator that moves inversely with equity prices

answer

TRUE

question

T/F Inflation can cause investment in non-monetary projects

answer

TRUE

question

T/F Hidden unemployment is workers who have given up looking for a job

answer

TRUE

question

T/F Technology cannot be a cause of unemployment

answer

FALSE

question

Most probably the social security shortfall problem probably can be helped by A) Raising the retirement age B) Selling more treasury bonds C) Raising the interest rate D) None of these

answer

Raising the retirement age

question

T/F Fiat money has an intrinsic value

answer

FALSE

question

The most stable element in the quantity theory of money is A) Velocity B) Money C) Output D) None of these

answer

Velocity

question

Accelerated growth in the money supply can result in A) Deflation B) Stagnation C) Inflation D) All of these

answer

Inflation

question

Trade balances are created through A) Tariffs B) Comparative Advantage C) Currency differences D) All of these

answer

All of these

question

Limits of the purchasing power parity would include A) Comparable goods may not be direct substitutes B) Many goods and services are not traded C) All of these D) None of these

answer

All of these

question

Investing internationally an investor must weigh a country's A) Economic stability B) The political situation C) Government policy regarding foreign ownership D) All of these

answer

All of these

question

T/F Accelerated growth in the money supply can lead to hyperinflation

answer

TRUE

question

T/F In an open economy national savings equals domestic investment plus net capital outflow

answer

TRUE

question

T/F the Fisher effect is not borne out by the Federal Reserve's interest movements

answer

FALSE

question

T/F The basis for net capital outflows is that investors will seek a higher return than they can get domestically

answer

TRUE

question

T/F Free trade represents a closed economy

answer

FALSE

question

T/F A trade deficit means that a country exports more than it imports

answer

FALSE

question

T/F A country can carry either a negative or positive trade balance

answer

TRUE

question

T/F Just as countries can trade goods and services they can also trade capital

answer

TRUE

question

T/F Fluctuation in a country's foreign exchange rate can alter an investor's return on capital

answer

TRUE

question

T/F In the short runs savings hurt an economy but in the long run they are a source of investment capital

answer

TRUE

question

In the Keynesian economic model the Savings must be offset by the A) Consumption B) Taxes C) Investment D) None of these are at equilibrium

answer

Investment

question

T/F "Says Law" pertains to the slope of the demand curve

answer

FALSE

question

The effectiveness of the fiscal multiplier relies on the marginal propensity to A) Consume B) Save C) All of these D) None of these

answer

All of these

question

If the federal government wants to expand the aggregate demand they would A) Raise taxes B) Increase spending C) All of these D) None of these

answer

Increased spending

question

If the marginal propensity to consume is .6 then the marginal propensity to save must be A) .2 B) .4 C) .6 D) None of these

answer

.4

question

All other things must be equal an increase in a country's exchange rate will cause A) Exports to rise B) Imports to fall C) None of these D) Both of these

answer

None of these

question

When an economy goes into recession GDP will A) Rise B) Fall C) None of these D) Both of these

answer

Fall

question

T/F In trying to manage the business cycle the government is hampered by a recognition lag which is a recognition of the problem

answer

TRUE

Macroeconomics Study Guide – Final – Flashcards

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