Download govt. in the economy practice quiz

GOVT. IN THE ECONOMY PRACTICE QUIZ
TRUE/FALSE
1. To be a successful medium of exchange, money must exist in an unlimited supply.
2. Fiat money has no inherent worth.
3. Gross Domestic Product is an index that measures price changes by domestic
producers.
4. GDP that has been adjusted to remove inflation is called current GDP.
5. Structural unemployment is usually temporary.
6. The unemployment rate does not take into account the number of part-time workers
who want to have full-time jobs.
7. Full employment is reached when the unemployment rate drops below 7 percent.
8. The Fed requires all member banks to deposit a percentage of every deposit either in
their bank vaults or in the Fed to use as a reserve.
9. The Fed can implement its monetary policy by buying and selling government
securities.
10. If the Fed increases the interest rate, it will increase the supply of money.
11. A long-run effect of increasing the money supply can be inflation.
MULTIPLE CHOICE
12. Money that has an alternative use as
an economic good is
(A) Commodity money
(B) Wampum
(C) Fiat money
(D) Specie
13. In order for money to have value, it
must have all of the following
characteristics EXCEPT
(A) Portability
(B) Durability
(C) Plentiful availability
(D) Divisibility
14. Unemployment that is directly
related to swings in the business cycle is
(A) Frictional unemployment
(B) Cyclical unemployment
(C) Structural unemployment
(D) Seasonal unemployment
15. Changes in technology and changes
in consumer tastes can cause
(A) Frictional unemployment
(B) Cyclical unemployment
(C) Structural unemployment
(D) Seasonal unemployment
16. According to the demand-pull
theory, inflation is caused by
(A) Workers
(B) Producers
(C) Government
(D) Consumers
17. In the short run, in increase in the
money supply results in
(A) Lower interest rates
(B) Economic expansion
(C) Higher interest rates
(D) Increased consumer spending
COMPLETION
18. GDP is the most complete measure of a nation’s _______________________.
19. Although the Fed functions as the central bank of the United States, it is owned by
________________________.
20. Under an easy money policy, the Fed allows the money supply to grow and interest
rates to _______________________.
21. When the Fed buys government securities, the money supply __________________.
22. Tightening the money supply causes interest rates to ______________________.
MATCHING
23. When the government must borrow money to pay for
government programs
(A) Entitlements
(B) Deficit spending
24. Social programs that provide services or income to all
individuals who meet eligibility requirements
(C) Federal debt
25. Situation in which federal spending exceeds revenue
(D) Federal budget deficit
26. Total amount the government borrowed from investors to
finance deficit spending
(E) Barter economy
27. Economy based on trade rather than money
28. Something accepted as payments for goods and services
(A) Medium of exchange
29. Anything that serves as a medium of exchange and a store
of value
(B) Federal Reserve
System
30. Rush by depositors to withdraw their funds from a bank
(C) Fiat money
31. Anything a government decrees to by money
(D) Run on the bank
32. Nation’s central bank
(E) Money
33. Statistics used to measure changes in prices over time
(A) Gross Domestic
Product
34. Dollar amount of all final goods and services produced
within a country’s borders in a year
35. Measure of price changes received by domestic producers
for their output
36. Price changes for about 90,000 items
(B) Producer price index
(C) Price index
(D) Consumer price index
(E) Unemployment rate
37. Percent of people out of work divided by the total number
of people in the civilian labor force
38. Decrease in the general price level
39. State of the economy characterized by high
unemployment, acute shortages, and excess production
capacity
40. Unemployment caused when machines replace people
41. Unemployment resulting from changes in the weather or
changes in demand for certain products
42. Period during which real GDP declines for two quarters in
a row or for six consecutive months
(A) Technological
unemployment
(B) Depression
(C) Deflation
(D) Seasonal
unemployment
(E) Recession
43. Inflation in the range of 1 to 3 percent per year
44. Caused by a fundamental change in the operations of the
economy
45. Fed plan to allow the money supply to grow and interest
rates to fall
46. Fed’s plan for expanding or contracting the money supply
(A) Structural
unemployment
(B) Creeping inflation
(C) Tight money policy
(D) Monetary policy
(E) Easy money policy
47. Fed plan to restrict the money supply and allow interest
rates to rise
48. Rule stating that a percentage of every deposit must be set
aside as legal reserves
49. Deposit a member bank keeps at the Fed
50. Interest rate the Fed charges on loans to financial
institutions
51. Best or lowest interest rate that commercial bankers
charge their customers
(A) Prime rate
(B) Reserve requirement
(C) Member bank reserve
(D) Discount rate
ANSWERS:
1. F
2. T
3. F
4. F
5. F
6. T
7. F
8. T
9. T
10. F
11. T
12. A
13. C
14. B
15. C
16. D
17. A
18. output/production
19. member banks
20. fall/decline
21. expands
22. increase/rise
23. B
24. A
25. D
26. C
27. E
28. A
29. E
30. D
31. C
32. B
33. C
34. A
35. C
36. D
37. E
38. C
39. B
40. A
41. D
42. E
43. B
44. A
45. E
46. D
47. C
48. B
49. C
50. D
51. A