Download Practice Test questions for Spring, 2012 Fiscal/Monetary 1. Fiscal

Practice Test questions for Spring, 2012 Fiscal/Monetary
1. Fiscal policy is carried out primarily by:
A) the Federal government.
B) state and local governments working together.
C) state governments alone.
D) local governments alone.
2. In the Employment Act of 1946, the Federal government:
A) applied the unemployment compensation program to intrastate workers.
B) agreed to subsidize unemployed workers to the extent of 50 percent of their average incomes.
C) committed itself to accept some degree of responsibility for the general levels of employment and prices.
D) agreed to hire, through public works programs, any employees who cannot find jobs with private industry.
3. Discretionary fiscal policy refers to:
A) any change in government spending or taxes that destabilizes the economy.
B) the authority that the President has to change personal income tax rates.
C) changes in taxes and government expenditures made by Congress to stabilize the economy.
D) the changes in taxes and transfers that occur as GDP changes.
4. Contractionary fiscal policy is so named because it:
A)
B)
C)
D)
involves a contraction of the nation's money supply.
necessarily reduces the size of government.
is aimed at reducing aggregate demand and thus achieving price stability.
is expressly designed to contract real GDP.
5. The crowding-out effect of expansionary fiscal policy suggests that:
A) government spending is increasing at the expense of private investment.
B) imports are replacing domestic production.
C) private investment is increasing at the expense of government spending.
D)
saving is increasing at the expense of investment
7. The reserves of a commercial bank consist of:
A) the amount of money market funds it holds.
B) deposits at the Federal Reserve Bank and vault cash.
C) government securities that the bank holds.
D) the bank's net worth.
When the money supply increases:
a. The interest rate rises; this in turn cuts back investment spending, which in turn raises
total expenditures and shifts the AD curve rightward.
b. The interest rate falls; this in turn stimulates investment spending, which in turn raises
total expenditures and shifts the AD curve leftward.
c. The interest rate falls; this in turn stimulates investment spending, which in turn raises
total expenditures and shifts the AD curve rightward.
d. The interest rate falls; this in turn stimulates investment spending, which in turn lowers
total expenditures and shifts the AD curve leftward.
Theoretical Theoretically, to eliminate a recessionary gap, the Fed could ____ the money supply, and
to eliminate an inflationary gap, the Fed could ____ the money supply.
a.
b.
c.
d.
e.
increase; decrease
increase; increase
decrease; increase
decrease; decrease
not change; not change
1.
a.
b.
c.
d.
If the Federal Reserve was attempting to reduce demand-pull inflation, the appropriate
policies would be:
sell government bonds, raise reserve requirements, and raise the discount rate
buy government bonds, raise reserve requirements and raise the discount rate
sell government bonds, lower reserve requirements, and lower the discount rate
sell government bonds, raise reserve requirements and lower the discount rate.
a.
b.
c.
d.
Keynesians are ____________and new classical economists
are_____________discretional fiscal and monetary policy
in favor of………….in favor of
against…..in favor of
in favor of………against
against……….against.
Which of the following best measures improvements in the standard of living of a nation?
A) growth of nominal GDP
C) growth of real GDP per capita
B) growth of real GDP
D) growth of national income
2.
e.
f.
g.
h.
If the Federal Reserve was attempting to reduce demand-pull inflation, the appropriate
policies would be:
sell government bonds, raise reserve requirements, and raise the discount rate
buy government bonds, raise reserve requirements and raise the discount rate
sell government bonds, lower reserve requirements, and lower the discount rate
sell government bonds, raise reserve requirements and lower the discount rate.
e.
f.
g.
h.
Keynesians are ____________and new classical economists
are_____________discretional fiscal and monetary policy
in favor of………….in favor of
against…..in favor of
in favor of………against
against……….against.
Which of the following best measures improvements in the standard of living of a nation?
A) growth of nominal GDP
C) growth of real GDP per capita
B) growth of real GDP
D) growth of national income
. Recurring upswings and downswings in an economy's real GDP over time are called:
A) recessions. B) business cycles. C) output yo-yos. D) total product oscillations.
Fiscal policy encompasses those actions that alter the money supply
(II) Monetary policy involves altering government tax and spending policies
a.
b.
c.
d.
Both are true
Both are false
I is true, II is false
I is false, II is true
. If a bank has $15 million in actual reserves of which $8 million are required reserves. It:
a. can make $23 million in loans
b. can make $7 million in loans
c. can make $2 million in loans
d. cannot make any loans at all
When the Federal Reserve sells securities in the open market, the nation’s money supply:
a. increases
b. b. is unaffected
c. c. decreases
d. d. fluctuates depending on aggregate demand
. The monetary policy used most frequently by the Fed is
a.
b.
c.
d.
changing the discount rate
b. altering the reserve requirement
c. moral persuasion
d. open market operations
22. Which of the following is the name of the program which allows banks to borrow from each
other overnight?
a.
b.
c.
d.
Discount Rate
Federal Open Market
Federal Deposit Insurance Corporation
Federal Funds Rate
. Which of the following would be the best Keynesian policy to follow if the economy were at full
employment and inflationary?
a. increase taxes and increase government spending by an equal amount
b. increase taxes and keep government spending at the same level
c. decrease government spending and decrease taxes by a greater amount
d. decrease government spending and decrease taxes by the same amount
. Money functions as:
A) a store of value. B) a unit of account. C) a medium of exchange. D) all of the
above.
If the quantity of money demanded exceeds the quantity supplied:
A) the supply-of-money curve will shift to the left.
B) the demand-for-money curve will shift to the right.
C) the interest rate will rise.
D) the interest rate will fall.
. If the monetary authorities want to reduce the monetary multiplier, they should:
A) lower the legal reserve ratio.
C) increase bank reserves.
B) raise the legal reserve ratio.
D) lower interest rates.
. The discount rate is the interest:
A) rate at which the central banks lend to the U.S. Treasury.
B) rate at which the Federal Reserve Banks lend to commercial banks.
C) yield on long-term government bonds.
D) rate at which commercial banks lend to the public.
The sale of government bonds by the Federal Reserve Banks to commercial banks will:
A) increase aggregate supply.
C) increase aggregate demand.
B) decrease aggregate supply.
D) decrease aggregate demand.