Microeconomics Unit 10-12 Practice Tests & Unit Assignments

question

"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax?

answer

benefits received

question

"It would be an undue hardship to require people whose income is below $15,000 per year to pay income taxes." This statement reflects which of the following principles for a tax?

answer

ability to pay

question

"Tax cuts, by providing incentives to work, save, and invest, will raise employment and lower the price level." This argument is made by the:

answer

supply-side economists

question

A decrease in real GDP would affect the U.S. economy by:

answer

cutting tax revenues and raising government expenditures

question

A government spending and taxation policy to achieve economic growth and stability is known as:

answer

fiscal policy

question

A tax is regressive if it collects a:

answer

smaller fraction of income as income rises

question

A tax is structured so that people with the same income pay the same percentage of their income in taxes is called a(an):

answer

flat (proportional) tax

question

A tax system in which the tax rate on everyone's first $10,000 o f income is 10 percent, the tax rate on everyone's second $10,000 of income is 15 percent, and the tax rate on all income over $20,000 is 25 percent is a (an):

answer

progressive tax

question

According to supply-side fiscal policy, reducing tax rates on wages and profits will:

answer

reduce both unemployment and inflation

question

Fiscal policy refers to:

answer

changes in government spending and taxation aimed at achieving an economic policy goal

question

Economists and others who believe that a government can help get an economy out from a recession or a depression through the use of taxing and spending are called:

answer

Keynesians

question

Fiscal policy refers to government's choices regarding the:

answer

overall level of government purchases and taxes

question

Sharon pays a tax of $4,000 on her income of $40,000, while Brad pays a tax of $1,000 on his income of $20,000. This tax is:

answer

progressive

question

Supply-siders' policy recommendations include:

answer

lower tax rates, lower resource prices, and decreased government regulation

question

Suppose the economy is producing beyond capacity and is experiencing inflation. Those who believe in an active fiscal policy would argue for:

answer

a decrease in taxes

question

Taxes affect the level of aggregate or total market demand primarily through changing the level of ___________, which alters ____________.

answer

disposable income; consumption

question

The benefits-received principle of taxation is MOST evident in:

answer

excise taxes on gasoline

question

The rate structure (percentage you pay) in federal income taxes is:

answer

progressive

question

To combat a recession, Keynesian fiscal policy recommends:

answer

an increase in government spending

question

How does the total taxes as a percentage of GDP in the United States compare to those of Western European countries, such as the United Kingdom, Germany, and Sweden?

answer

U.S. taxation is smaller

question

In 2020, an individual may inherit up to $_____________ tax free before they start paying an estate tax.

answer

$11,580,000

question

A tax is proportional if, as a person's income rises, the:

answer

tax rate is constant

question

A tax whose impact varies inversely with the income of the person taxed, and poor people having a higher percentage of their income taxed than rich people, is known as a:

answer

regressive tax

question

An increase in government spending will have the greatest expansionary impact on the economy it it is combined with:

answer

a tax cut

question

Fiscal policy is concerned with:

answer

changes in government spending and/or taxes

question

Generally, most economists believe that a sales tax is:

answer

regressive

question

How does total taxes as a percentage of GDP in the United States compare to those of Western European countries, such as the United Kingdom, Germany, and Sweden?

answer

U.S. taxation is smaller

question

If you are a poor person, which type of tax (regressive, progressive, flat or proportional) would you LEAST like? Why?

answer

regressive- because it takes a larger percent of a poor person's income

question

If you want to go fishing, and need to purchase a fishing license, what type of philosophy of taxation is the fishing license?

answer

benefits received

question

Personal income received minus personal taxes is called:

answer

disposable income

question

Suppose George's income is $10,000 and he pays a tax of $1,000, but Laura's income is $50,000 and she pays a tax of $4,000. Such a tax is:

answer

regressive

question

Suppose the economy is experiencing a high rate of inflation. According to Keynesian theory, which of the following policies would be used to combat inflation?

answer

raise taxes

question

A payroll tax is a:

answer

regressive tax above a certain income level

question

Unemployment compensation payments:

answer

rise during a recession and thus reduce the severity of the recession

question

Which of the following IS NOT an accurate statement concerning the differences between classical and Keynesian economics?

answer

Classical economists favor government intervention in the economy, while Keynesians do not

question

Which of the following IS an accurate statement regarding corporate and individual income tax rates over the past few decades?

answer

corporate tax rates have declined, while individual tax rates have increased

question

Which of the following IS an example of a progressive tax?

answer

the federal personal income tax

question

Which tax pays for the majority of local services?

answer

property tax

question

Why does the payroll tax affect poor people more negatively than wealthy people?

answer

because the poor pay on every dollar earned, while the wealthy stop paying after they reach a certain dollar amount (cap)

question

Go to the following webpage on the capital gains tax. All of the following statements are true EXCEPT:

answer

just over 20% of the increase in income inequality was the result of an increase in the share of household income from capital gains

question

Go to the following web page on corporate lobbying and tax avoidance. According to the author, 30 top brand corporations paid a federal income tax rate of ________ on profit of _____between 2008 and 2010. 29 of these companies spent __________ dollars on lobbying during those two years.

answer

-6.7% , $160 billion, and $500 million

question

Visit the following web page on repatriated taxes in 2018. All of the following are accurate statements from the article EXCEPT:

answer

in 2018: Q1 there was a dramatic decrease in share buybacks

question

Go to the following web page on the Is Overregulation Holding Back the US Economy? After reading the information, all of the following statements are true EXCEPT:

answer

on the Heritage index of Regulatory Freedom, the United States ranks nearly last out of 131 countries

question

All of the following are accurate statements concerning regulation and deregulation EXCEPT:

answer

deregulation is the process of increasing restrictions on prices, product standards and entry conditions.

question

Banks:

answer

use people's deposits to make loans

question

Which of the following monetary instruments (tools) IS NOT used by the Fed?

answer

tax rate cuts

question

In which type of money is liquidity most important?

answer

question

Which of the following IS NOT a correct statement concerning the Federal Reserve System?

answer

the agency is regulated by whichever political party is in power

question

Other things being equal, when the Fed raises the reserve requirement:

answer

the money supply tends to fall

question

When the Fed sells securities in the open market, which of the following is likely to occur?

answer

the money supply will decrease

question

Suppose the Fed decreases the reserve requirement from 10% to 9%. Which of the following will occur?

answer

bank excess reserves will increase

question

Sara saves 10% of each paycheck so she can tour Europe two years from now. In this example, money is functioning as:

answer

a store of value

question

Giving up a dollar bill to purchase an ice cream cone illustrates money's function as:

answer

a medium of exchange

question

Assume Bank A receives a deposit of $4,000. If the required reserve ratio is 15%, how much can Bank A loan out?

answer

$3,400

question

Liquidity:

answer

is the ease with which an asset can be converted into a medium of exchange

question

Which of the following financial assets is considered to be the MOST liquid?

answer

a twenty dollar bill

question

In all, how many Federal Reserve District Banks are there?

answer

question

Which of the following IS correct?

answer

the FOMC conducts the Federal Reserve's open market operations

question

For something to be a medium of exchange, it must be:

answer

generally accepted by people for goods and services

question

Barter is the:

answer

direct exchange of goods and services

question

Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a:

answer

unit of account

question

One hundred dollars on deposit in a checking account represents the use of money as a:

answer

store of value

question

If something is a medium of exchange, then it:

answer

is widely accepted as payment for purchases

question

Which of the following IS NOT counted as part of M1?

answer

passbook savings deposits

question

Which one of the following IS part of the M2 definition of the money supply, but NOT part of M1?

answer

small time deposits of less than $100,000

question

The progression of the money supplies from most liquid to least liquid would look like:

answer

M1, M2, M3

question

The number of presidentially appointed members who sit on the Federal Reserve Board of Governors is:

answer

seven

question

With respect to controlling the money supply, the law requires the Fed to take orders from:

answer

no one- the Fed is an independent agency

question

Which of the following IS NOT part of the Federal Reserve System?

answer

Council of Economics Advisors

question

The Fed's principal decision-making body, which directs buying and selling U.S. government securities, is known as the:

answer

Federal Open Market Committee

question

The MAIN purpose of the Fed is to:

answer

maintain the proper functioning of our money system

question

The Federal Deposit Insurance Corporation:

answer

insures all demand deposits up to $250,000

question

The Monetary Control Act of 1980 extended the Fed's authority to:

answer

impose required-reserve ratios on all depository institutions

question

A bank's "required reserves" are:

answer

held as deposits with the Federal Reserve System

question

Banks normally hold few excess reserves because this practice is:

answer

not profitable

question

An individual bank can lend out at most its:

answer

excess reserves

question

The required reserve ratio is:

answer

the minimum amount of reserves the Fed requires a bank to hold

question

A bank creates money when it:

answer

makes a loan from its excess reserves

question

Which of the following policy actions by the Fed would cause the money supply to increase?

answer

an open-market purchase of government securities

question

If there is a recession, the Fed would most likely:

answer

encourage banks to provide loans by lowering the discount rate

question

What interest rate does a bank pay when it borrows reserves from the Fed?

answer

the discount rate

question

Which of the following actions by the Fed would increase the money supply?

answer

reducing the required reserve ratio

question

Most monetarists favor:

answer

a constant increase in the money supply year after year equal to the potential annual growth rate in real GDP

question

The exchange of one good for another, without the use of money, is known as:

answer

barter

question

Buying a cup of coffee with a dollar bill represents the use of money as a:

answer

medium of exchange

question

When you compare the price of a television and an automobile, which function of money is being used?

answer

unit of account

question

Which of the following is the MOST liquid store of purchasing power?

answer

a dollar bill

question

Which of the following IS NOT part of M1?

answer

credit cards

question

Which of the following IS NOT considered part of M2?

answer

large time deposits of more than $100,000

question

The Federal Reserve System:

answer

controls the nation's money supply

question

In its function of controlling the money supply, the Fed does all BUT WHICH ONE of the following?

answer

holds gold belonging to foreign governments

question

Which of the following IS in charge of the buying and selling of government securities by the Fed?

answer

the Federal Open Market Committee

question

The Monetary Control Act of 1980:

answer

extended the Fed's authority to impose required-reserve ratios on all depository institutions

question

The required reserves of a bank are:

answer

held on deposit with the Federal Reserve System

question

Banks would be expected to minimize holding excess bank reserves in their bank vaults because this practice is:

answer

not profitable

question

The minimum amount of deposits that a bank must keep in cash reserves is known as:

answer

the required reserve ratio

question

Assume the First National Bank has deposits of $20 million. If the required reserve ratio is 20 percent, the bank will keep what amount of reserves?

answer

$4 million

question

First National Bank is subject to a 10 percent required-reserve ratio. If this bank received a new checkable deposit of $1,000, it could make new loans of:

answer

$900

question

According to fractional reserve banking theory, a bank creates money when it:

answer

makes a loan from its excess reserves

question

If a bank has reserves of $20 million, and the required reserve ratio is 5%, how much money does the bank have to make loans?

answer

$19 million

question

An increase in the money supply:

answer

lowers the interest rate, causing an increase in investment and an increase in GDP

question

You are thinking about purchasing a home. What change in the three monetary policy tools of the Federal Reserve would MOST affect your decision to purchase a home?

answer

change in the discount rate

question

Go to the following web page on "What is Money?"http://www.ex.ac.uk/~RDavies/arian/origins.html Then answer the following questions. The easiest way to answer this question would be to copy and paste the questions into a word processor, type in your answers, then copy and paste your answers into the text box provided for this question.

a) What are the two reasons stated for gold being used as money for thousands of years?

b) According to the author, what is the best definition of money? (hint: it is in bold print)

c) Under the heading, "Paper Money" which was the first country to use paper money?

answer

a) The attractiveness of gold, from an aesthetic point of view, and its resistance to corrosion are two of the properties which led to its use for monetary transactions for thousands of years.

b) Money is anything that is widely used for making payments and accounting for debts and credits

c) China

question

Go to the following web page on the " Coming Derivatives Crisis". All of the following are true statements EXCEPT:

answer

Today, the top 10 U.S. banks control 25% of all U.S. banking assets.

question

Who establishes monetary policy?

answer

The Federal Reserve

question

Go to the following webpage: http://webofdebt.wordpress.com/2007/09/11/whats-the-wizard-of-oz-got-to-do-with-money-reform/ In the book, "The Wonderful Wizard of Oz" which was later made into the movie, "The Wizard of Oz", the main characters are symbolic representations. Please describe who each represents:

1) the scarecrow
2) the Tin Man
3) the Cowardly Lion
4) the Yellow Brick Road
5) the Wicked Witch of the East
6) the Munchkins

answer

1) Farmers
2) Industrial laborers
3) William Jennings Bryan
4) Gold standard
5) Eastern financial establishment
6) Generally enslaved

question

All of the following statements concerning quantitative easing are true EXCEPT:

answer

most of the money from QE percolated down to the average person

question

What is the main reason why bankers and wealthy people like low interest rates?

answer

to keep providing cheap money for speculators to buy stocks and bonds to make gains

question

All of the following are accurate statements concerning Modern Monetary Theory (MMT) EXCEPT:

answer

private banks, not governments, should create their own money supply

question

The piece of legislation created in the 1930's during the Great Depression to regulate banks and separated commercial from investment banking was called:

answer

the Glass-Steagall Act

question

All of the following are accurate statements concerning the role of the personal savings rate and its impact on the economy EXCEPT:

answer

wealthy people are much more at risk because their investments continue to generate income to be spent

question

A decrease in interest rates is likely to:

answer

increase aggregate (total) demand in the economy

question

Mary can produce housing at a lower opportunity cost than Joan. Economists would say that:

answer

Mary has the comparative advantage in the production of housing

question

When trade takes place:

answer

both parties can be better off

question

The average worker in the United States can produce 20 tons of coal or 10 tons of iron per hour. The average worker in Canada can produce either 10 tons of coal or 10 tons of iron per hour. The United States has a comparative advantage in the production of:

answer

coal

question

In Japan the opportunity cost of producing one television is one computer. In the United States the opportunity cost of producing one television is two computers. The United States has a comparative advantage in producing:

answer

computers

question

Specialization and trade:

answer

is accurately described by each of the preceding statements

question

The ability to produce a particular good using fewer resources than a second country is:

answer

absolute advantage

question

_______________________are taxes imposed on goods and services produced abroad and sold domestically.

answer

tariffs

question

All of the following are used as arguments against free trade EXCEPT:

answer

free trade makes consumers worse off

question

A quota is:

answer

a limit on the quantity of a good that can be imported

question

Balance of Trade means:

answer

the value of a nation's imports subtracted from its exports

question

Suppose Japan has a comparative advantage over Canada in the production of DVDs. This means that Japan:

answer

has a lower opportunity cost of DVD production than does Canada

question

In a two good, two-country world, a country has a comparative advantage in any good for which it has a:

answer

lower opportunity cost than the other country

question

Which of the following statements IS true?

answer

specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves

question

Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of:

answer

a tariff

question

A tariff has the effect of granting __________________ a larger share of the domestic market.

answer

domestic producers

question

The principal objective of WTO is to:

answer

reduce the level of all tariffs

question

Suppose a quota on foreign-made automobiles is proposed in Congress. Which of the following groups is MOST likely to oppose the bill?

answer

consumers

question

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

answer

industries in the early stages of development must be protected from more mature producers

question

The sale of a product in a foreign market at a price below cost is called:

answer

dumping

question

The exchange rate is:

answer

the number of units of one nation's currency required in exchange for one unit of another nation's currency

question

If one dollar exchanges for 20 Euros, then:

answer

a Euro is worth a nickel

question

A country that has a lower opportunity cost of producing a good:

answer

has a comparative advantage

question

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

answer

total output will be highest if Japan specializes in rice and the United States specializes in bicycles

question

Absolute advantage occurs when one nation can produce a good _____________its trading partners.

answer

more efficiently or at a lower cost than

question

An unfavorable balance of trade occurs when:

answer

the value of exports is less than the value of imports

question

A tariff is a tax on ____________goods that is designed to _________________.

answer

imported; protect domestic industries

question

A tariff has the effect of:

answer

raising the price of the imported product

question

The original North American Free Trade Agreement (NAFTA), as well as the amended USMCA agreement affects trade between:

answer

The United States, Canada, and Mexico

question

A restriction on the quantity of a good that can be imported into a country is a (an):

answer

quota

question

Which of the following IS NOT an argument used in favor of protectionism?

answer

to reduce prices paid by domestic consumers

question

The argument that foreign trade should be restricted to protect domestic employment and output is based on the idea that:

answer

sales of imports come at the expense of domestic goods and jobs

question

Embargoes are generally not effective. The reason for this is because:

answer

it is difficult to get other countries to agree to participate

question

The exchange rate is the:

answer

number of units of a foreign currency that can be bought with one unit of your own currency

question

If one U.S. dollar can be exchanged for five French francs, then one franc can be exchanged for:

answer

20 cents

question

If the dollar appreciates,

answer

exports from the United States become more expensive for foreigners

question

All of the following are ideas on why free trade and globalization have benefited people throughout the world EXCEPT:

answer

the WTO is the primary international agency that supports labor and human rights

question

All of the following are views from those who oppose globalization EXCEPT:

answer

the United States adoption of the WTO went through a democratic process

question

Go to the following web page titled "20 Reasons Why Americans Should be Opposed to Insane Trade Policies". All of the following are reasons to be opposed to free trade polices EXCEPT:

answer

globalization of the economy has caused income inequality to decrease

question

Go to the following page on "Fair Trade" After reading the information there, which of the statements below is INACCURATE?

answer

fair trade allows multinational corporations to take advantage of cheap foreign labor to increase their profits

question

The total balance of trade in goods and services for the year 2019 was:

answer

$854 million

question

Which of the following IS NOT a true statement concerning the value of a nation's currency?

answer

U.S. consumers dislike an appreciated dollar, because it raises the cost of living

question

Which of the following IS NOT an economic policy of the Washington Consensus Model?

answer

governments are encouraged to run budget deficits

question

Go to the following web page on why the new free-trade agreements with South Korea, Columbia and Panama will boost the US economy. All of the following are reasons cited by the author for why these free trade agreements are a good thing EXCEPT:

answer

concerning the trade agreement with Panama, there would be an anticipated 60% increase in exports of US made automobiles

question

Go to the following web page on how " Offshoring Has Destroyed the American Economy". Scroll down about two thirds down the page. The main point that Nobel winning economist Herman Daly makes concerning free trade is:

answer

the classic theory of free trade is based on comparative advantage, not on absolute advantage, and that offshoring is based on absolute advantage. Thus, offshoring is not free trade

question

Go to the following web page that discusses the Transatlantic Trade and Investment Partnership (TTIP). According to the author, which of the following IS NOT one of the purposes of this trade deal?

answer

an expansion of the rights of individuals to sue corporations for collusion

question

Part of international trade involves countries using their money to purchase other countries currencies, invest in their stock markets, and purchase financial products such as US treasuries (bonds, debt). In August 2002, a private lawsuit was filed in U.S. courts which sought to seize over $1 trillion worth of Saudi Arabian and other Middle Eastern assets in the United States as compensation for terrorist attacks. If the lawsuit would have been successful, how would that have affected future foreign investment in the United States? How would it affect interest rates?

answer

future investment would decrease, interest rates would increase

question

The main reason why countries pursue an economic policy of running trade surpluses is:

answer

so they can achieve higher levels of employment than if they just relied on domestic demand

question

The main purpose of sanctions is to:

answer

influence the behavior of the target country's governments, individuals or groups in hopes that will improve the situation in that country

question

Which of the following IS NOT hurt by tariffs?

answer

local businesses and industries

question

All of the following are accurate statements concerning a depreciated currency EXCEPT:

answer

if the US dollar depreciates, then U.S. goods become more expensive on world markets

question

All of the following statements concerning the US dollar as a reserve currency are correct EXCEPT:

answer

the United States has used recycled money to reduce its domestic federal budget deficits and to reduce military expenditures

1 of 163

question

"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax?

answer

benefits received

question

"It would be an undue hardship to require people whose income is below $15,000 per year to pay income taxes." This statement reflects which of the following principles for a tax?

answer

ability to pay

question

"Tax cuts, by providing incentives to work, save, and invest, will raise employment and lower the price level." This argument is made by the:

answer

supply-side economists

question

A decrease in real GDP would affect the U.S. economy by:

answer

cutting tax revenues and raising government expenditures

question

A government spending and taxation policy to achieve economic growth and stability is known as:

answer

fiscal policy

question

A tax is regressive if it collects a:

answer

smaller fraction of income as income rises

question

A tax is structured so that people with the same income pay the same percentage of their income in taxes is called a(an):

answer

flat (proportional) tax

question

answer

progressive tax

question

According to supply-side fiscal policy, reducing tax rates on wages and profits will:

answer

reduce both unemployment and inflation

question

Fiscal policy refers to:

answer

changes in government spending and taxation aimed at achieving an economic policy goal

question

Economists and others who believe that a government can help get an economy out from a recession or a depression through the use of taxing and spending are called:

answer

Keynesians

question

Fiscal policy refers to government's choices regarding the:

answer

overall level of government purchases and taxes

question

Sharon pays a tax of $4,000 on her income of $40,000, while Brad pays a tax of $1,000 on his income of $20,000. This tax is:

answer

progressive

question

Supply-siders' policy recommendations include:

answer

lower tax rates, lower resource prices, and decreased government regulation

question

Suppose the economy is producing beyond capacity and is experiencing inflation. Those who believe in an active fiscal policy would argue for:

answer

a decrease in taxes

question

Taxes affect the level of aggregate or total market demand primarily through changing the level of ___________, which alters ____________.

answer

disposable income; consumption

question

The benefits-received principle of taxation is MOST evident in:

answer

excise taxes on gasoline

question

The rate structure (percentage you pay) in federal income taxes is:

answer

progressive

question

To combat a recession, Keynesian fiscal policy recommends:

answer

an increase in government spending

question

How does the total taxes as a percentage of GDP in the United States compare to those of Western European countries, such as the United Kingdom, Germany, and Sweden?

answer

U.S. taxation is smaller

question

In 2020, an individual may inherit up to $_____________ tax free before they start paying an estate tax.

answer

$11,580,000

question

A tax is proportional if, as a person's income rises, the:

answer

tax rate is constant

question

A tax whose impact varies inversely with the income of the person taxed, and poor people having a higher percentage of their income taxed than rich people, is known as a:

answer

regressive tax

question

An increase in government spending will have the greatest expansionary impact on the economy it it is combined with:

answer

a tax cut

question

Fiscal policy is concerned with:

answer

changes in government spending and/or taxes

question

Generally, most economists believe that a sales tax is:

answer

regressive

question

How does total taxes as a percentage of GDP in the United States compare to those of Western European countries, such as the United Kingdom, Germany, and Sweden?

answer

U.S. taxation is smaller

question

If you are a poor person, which type of tax (regressive, progressive, flat or proportional) would you LEAST like? Why?

answer

regressive- because it takes a larger percent of a poor person's income

question

If you want to go fishing, and need to purchase a fishing license, what type of philosophy of taxation is the fishing license?

answer

benefits received

question

Personal income received minus personal taxes is called:

answer

disposable income

question

Suppose George's income is $10,000 and he pays a tax of $1,000, but Laura's income is $50,000 and she pays a tax of $4,000. Such a tax is:

answer

regressive

question

Suppose the economy is experiencing a high rate of inflation. According to Keynesian theory, which of the following policies would be used to combat inflation?

answer

raise taxes

question

A payroll tax is a:

answer

regressive tax above a certain income level

question

Unemployment compensation payments:

answer

rise during a recession and thus reduce the severity of the recession

question

Which of the following IS NOT an accurate statement concerning the differences between classical and Keynesian economics?

answer

Classical economists favor government intervention in the economy, while Keynesians do not

question

Which of the following IS an accurate statement regarding corporate and individual income tax rates over the past few decades?

answer

corporate tax rates have declined, while individual tax rates have increased

question

Which of the following IS an example of a progressive tax?

answer

the federal personal income tax

question

Which tax pays for the majority of local services?

answer

property tax

question

Why does the payroll tax affect poor people more negatively than wealthy people?

answer

because the poor pay on every dollar earned, while the wealthy stop paying after they reach a certain dollar amount (cap)

question

Go to the following webpage on the capital gains tax. All of the following statements are true EXCEPT:

answer

just over 20% of the increase in income inequality was the result of an increase in the share of household income from capital gains

question

answer

-6.7% , $160 billion, and $500 million

question

Visit the following web page on repatriated taxes in 2018. All of the following are accurate statements from the article EXCEPT:

answer

in 2018: Q1 there was a dramatic decrease in share buybacks

question

Go to the following web page on the Is Overregulation Holding Back the US Economy? After reading the information, all of the following statements are true EXCEPT:

answer

on the Heritage index of Regulatory Freedom, the United States ranks nearly last out of 131 countries

question

All of the following are accurate statements concerning regulation and deregulation EXCEPT:

answer

deregulation is the process of increasing restrictions on prices, product standards and entry conditions.

question

Banks:

answer

use people's deposits to make loans

question

Which of the following monetary instruments (tools) IS NOT used by the Fed?

answer

tax rate cuts

question

In which type of money is liquidity most important?

answer

question

Which of the following IS NOT a correct statement concerning the Federal Reserve System?

answer

the agency is regulated by whichever political party is in power

question

Other things being equal, when the Fed raises the reserve requirement:

answer

the money supply tends to fall

question

When the Fed sells securities in the open market, which of the following is likely to occur?

answer

the money supply will decrease

question

Suppose the Fed decreases the reserve requirement from 10% to 9%. Which of the following will occur?

answer

bank excess reserves will increase

question

Sara saves 10% of each paycheck so she can tour Europe two years from now. In this example, money is functioning as:

answer

a store of value

question

Giving up a dollar bill to purchase an ice cream cone illustrates money's function as:

answer

a medium of exchange

question

Assume Bank A receives a deposit of $4,000. If the required reserve ratio is 15%, how much can Bank A loan out?

answer

$3,400

question

Liquidity:

answer

is the ease with which an asset can be converted into a medium of exchange

question

Which of the following financial assets is considered to be the MOST liquid?

answer

a twenty dollar bill

question

In all, how many Federal Reserve District Banks are there?

answer

question

Which of the following IS correct?

answer

the FOMC conducts the Federal Reserve's open market operations

question

For something to be a medium of exchange, it must be:

answer

generally accepted by people for goods and services

question

Barter is the:

answer

direct exchange of goods and services

question

Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a:

answer

unit of account

question

One hundred dollars on deposit in a checking account represents the use of money as a:

answer

store of value

question

If something is a medium of exchange, then it:

answer

is widely accepted as payment for purchases

question

Which of the following IS NOT counted as part of M1?

answer

passbook savings deposits

question

Which one of the following IS part of the M2 definition of the money supply, but NOT part of M1?

answer

small time deposits of less than $100,000

question

The progression of the money supplies from most liquid to least liquid would look like:

answer

M1, M2, M3

question

The number of presidentially appointed members who sit on the Federal Reserve Board of Governors is:

answer

seven

question

With respect to controlling the money supply, the law requires the Fed to take orders from:

answer

no one- the Fed is an independent agency

question

Which of the following IS NOT part of the Federal Reserve System?

answer

Council of Economics Advisors

question

The Fed's principal decision-making body, which directs buying and selling U.S. government securities, is known as the:

answer

Federal Open Market Committee

question

The MAIN purpose of the Fed is to:

answer

maintain the proper functioning of our money system

question

The Federal Deposit Insurance Corporation:

answer

insures all demand deposits up to $250,000

question

The Monetary Control Act of 1980 extended the Fed's authority to:

answer

impose required-reserve ratios on all depository institutions

question

A bank's "required reserves" are:

answer

held as deposits with the Federal Reserve System

question

Banks normally hold few excess reserves because this practice is:

answer

not profitable

question

An individual bank can lend out at most its:

answer

excess reserves

question

The required reserve ratio is:

answer

the minimum amount of reserves the Fed requires a bank to hold

question

A bank creates money when it:

answer

makes a loan from its excess reserves

question

Which of the following policy actions by the Fed would cause the money supply to increase?

answer

an open-market purchase of government securities

question

If there is a recession, the Fed would most likely:

answer

encourage banks to provide loans by lowering the discount rate

question

What interest rate does a bank pay when it borrows reserves from the Fed?

answer

the discount rate

question

Which of the following actions by the Fed would increase the money supply?

answer

reducing the required reserve ratio

question

Most monetarists favor:

answer

a constant increase in the money supply year after year equal to the potential annual growth rate in real GDP

question

The exchange of one good for another, without the use of money, is known as:

answer

barter

question

Buying a cup of coffee with a dollar bill represents the use of money as a:

answer

medium of exchange

question

When you compare the price of a television and an automobile, which function of money is being used?

answer

unit of account

question

Which of the following is the MOST liquid store of purchasing power?

answer

a dollar bill

question

Which of the following IS NOT part of M1?

answer

credit cards

question

Which of the following IS NOT considered part of M2?

answer

large time deposits of more than $100,000

question

The Federal Reserve System:

answer

controls the nation's money supply

question

In its function of controlling the money supply, the Fed does all BUT WHICH ONE of the following?

answer

holds gold belonging to foreign governments

question

Which of the following IS in charge of the buying and selling of government securities by the Fed?

answer

the Federal Open Market Committee

question

The Monetary Control Act of 1980:

answer

extended the Fed's authority to impose required-reserve ratios on all depository institutions

question

The required reserves of a bank are:

answer

held on deposit with the Federal Reserve System

question

Banks would be expected to minimize holding excess bank reserves in their bank vaults because this practice is:

answer

not profitable

question

The minimum amount of deposits that a bank must keep in cash reserves is known as:

answer

the required reserve ratio

question

Assume the First National Bank has deposits of $20 million. If the required reserve ratio is 20 percent, the bank will keep what amount of reserves?

answer

$4 million

question

First National Bank is subject to a 10 percent required-reserve ratio. If this bank received a new checkable deposit of $1,000, it could make new loans of:

answer

$900

question

According to fractional reserve banking theory, a bank creates money when it:

answer

makes a loan from its excess reserves

question

If a bank has reserves of $20 million, and the required reserve ratio is 5%, how much money does the bank have to make loans?

answer

$19 million

question

An increase in the money supply:

answer

lowers the interest rate, causing an increase in investment and an increase in GDP

question

You are thinking about purchasing a home. What change in the three monetary policy tools of the Federal Reserve would MOST affect your decision to purchase a home?

answer

change in the discount rate

question

answer

question

Go to the following web page on the " Coming Derivatives Crisis". All of the following are true statements EXCEPT:

answer

Today, the top 10 U.S. banks control 25% of all U.S. banking assets.

question

Who establishes monetary policy?

answer

The Federal Reserve

question

answer

1) Farmers
2) Industrial laborers
3) William Jennings Bryan
4) Gold standard
5) Eastern financial establishment
6) Generally enslaved

question

All of the following statements concerning quantitative easing are true EXCEPT:

answer

most of the money from QE percolated down to the average person

question

What is the main reason why bankers and wealthy people like low interest rates?

answer

to keep providing cheap money for speculators to buy stocks and bonds to make gains

question

All of the following are accurate statements concerning Modern Monetary Theory (MMT) EXCEPT:

answer

private banks, not governments, should create their own money supply

question

The piece of legislation created in the 1930's during the Great Depression to regulate banks and separated commercial from investment banking was called:

answer

the Glass-Steagall Act

question

All of the following are accurate statements concerning the role of the personal savings rate and its impact on the economy EXCEPT:

answer

wealthy people are much more at risk because their investments continue to generate income to be spent

question

A decrease in interest rates is likely to:

answer

increase aggregate (total) demand in the economy

question

Mary can produce housing at a lower opportunity cost than Joan. Economists would say that:

answer

Mary has the comparative advantage in the production of housing

question

When trade takes place:

answer

both parties can be better off

question

answer

coal

question

answer

computers

question

Specialization and trade:

answer

is accurately described by each of the preceding statements

question

The ability to produce a particular good using fewer resources than a second country is:

answer

absolute advantage

question

_______________________are taxes imposed on goods and services produced abroad and sold domestically.

answer

tariffs

question

All of the following are used as arguments against free trade EXCEPT:

answer

free trade makes consumers worse off

question

A quota is:

answer

a limit on the quantity of a good that can be imported

question

Balance of Trade means:

answer

the value of a nation's imports subtracted from its exports

question

Suppose Japan has a comparative advantage over Canada in the production of DVDs. This means that Japan:

answer

has a lower opportunity cost of DVD production than does Canada

question

In a two good, two-country world, a country has a comparative advantage in any good for which it has a:

answer

lower opportunity cost than the other country

question

Which of the following statements IS true?

answer

specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves

question

Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of:

answer

a tariff

question

A tariff has the effect of granting __________________ a larger share of the domestic market.

answer

domestic producers

question

The principal objective of WTO is to:

answer

reduce the level of all tariffs

question

Suppose a quota on foreign-made automobiles is proposed in Congress. Which of the following groups is MOST likely to oppose the bill?

answer

consumers

question

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

answer

industries in the early stages of development must be protected from more mature producers

question

The sale of a product in a foreign market at a price below cost is called:

answer

dumping

question

The exchange rate is:

answer

the number of units of one nation's currency required in exchange for one unit of another nation's currency

question

If one dollar exchanges for 20 Euros, then:

answer

a Euro is worth a nickel

question

A country that has a lower opportunity cost of producing a good:

answer

has a comparative advantage

question

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

answer

total output will be highest if Japan specializes in rice and the United States specializes in bicycles

question

Absolute advantage occurs when one nation can produce a good _____________its trading partners.

answer

more efficiently or at a lower cost than

question

An unfavorable balance of trade occurs when:

answer

the value of exports is less than the value of imports

question

A tariff is a tax on ____________goods that is designed to _________________.

answer

imported; protect domestic industries

question

A tariff has the effect of:

answer

raising the price of the imported product

question

The original North American Free Trade Agreement (NAFTA), as well as the amended USMCA agreement affects trade between:

answer

The United States, Canada, and Mexico

question

A restriction on the quantity of a good that can be imported into a country is a (an):

answer

quota

question

Which of the following IS NOT an argument used in favor of protectionism?

answer

to reduce prices paid by domestic consumers

question

The argument that foreign trade should be restricted to protect domestic employment and output is based on the idea that:

answer

sales of imports come at the expense of domestic goods and jobs

question

Embargoes are generally not effective. The reason for this is because:

answer

it is difficult to get other countries to agree to participate

question

The exchange rate is the:

answer

number of units of a foreign currency that can be bought with one unit of your own currency

question

If one U.S. dollar can be exchanged for five French francs, then one franc can be exchanged for:

answer

20 cents

question

If the dollar appreciates,

answer

exports from the United States become more expensive for foreigners

question

All of the following are ideas on why free trade and globalization have benefited people throughout the world EXCEPT:

answer

the WTO is the primary international agency that supports labor and human rights

question

All of the following are views from those who oppose globalization EXCEPT:

answer

the United States adoption of the WTO went through a democratic process

question

Go to the following web page titled "20 Reasons Why Americans Should be Opposed to Insane Trade Policies". All of the following are reasons to be opposed to free trade polices EXCEPT:

answer

globalization of the economy has caused income inequality to decrease

question

Go to the following page on "Fair Trade" After reading the information there, which of the statements below is INACCURATE?

answer

fair trade allows multinational corporations to take advantage of cheap foreign labor to increase their profits

question

The total balance of trade in goods and services for the year 2019 was:

answer

$854 million

question

Which of the following IS NOT a true statement concerning the value of a nation's currency?

answer

U.S. consumers dislike an appreciated dollar, because it raises the cost of living

question

Which of the following IS NOT an economic policy of the Washington Consensus Model?

answer

governments are encouraged to run budget deficits

question

answer

concerning the trade agreement with Panama, there would be an anticipated 60% increase in exports of US made automobiles

question

answer

the classic theory of free trade is based on comparative advantage, not on absolute advantage, and that offshoring is based on absolute advantage. Thus, offshoring is not free trade

question

Go to the following web page that discusses the Transatlantic Trade and Investment Partnership (TTIP). According to the author, which of the following IS NOT one of the purposes of this trade deal?

answer

an expansion of the rights of individuals to sue corporations for collusion

question

answer

future investment would decrease, interest rates would increase

question

The main reason why countries pursue an economic policy of running trade surpluses is:

answer

so they can achieve higher levels of employment than if they just relied on domestic demand

question

The main purpose of sanctions is to:

answer

influence the behavior of the target country's governments, individuals or groups in hopes that will improve the situation in that country

question

Which of the following IS NOT hurt by tariffs?

answer

local businesses and industries

question

All of the following are accurate statements concerning a depreciated currency EXCEPT:

answer

if the US dollar depreciates, then U.S. goods become more expensive on world markets

question

All of the following statements concerning the US dollar as a reserve currency are correct EXCEPT:

answer

the United States has used recycled money to reduce its domestic federal budget deficits and to reduce military expenditures

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