Download Chapter 01 Economics: The Study of Opportunity Cost

ADCP 310 Fall 2010/Week 3 Quiz
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Name: ______________________________________ Section: _________ Date: __________
For each question, circle only one (1) response. If you change your answer, mark through your other
choices, circle your final answer. If more than one (1) answer is circled, the first answer will be graded.
1. Fiscal Policy is controlled by
A. the Federal Reserve Board.
B. Congress and the President.
C. the Supreme Court.
D. private banks.
2. Fiscal policy is purposeful movements in ____________ designed to direct an economy.
A. interest rates
B. legal structures
C. government regulations
D. government spending and taxes
3. Using the aggregate supply - aggregate demand model, the tax cuts of 2001 and 2003 that
came in the form of tax rebate checks would cause
A. aggregate demand to shift to the right
B. aggregate supply to shift to the right
C. aggregate demand to shift to the left
D. aggregate supply to shift to the left
4. Real economic growth during the first two years of President George W. Bush's second term
was
A. approximately 8.7% per year.
B. lower than real economic growth during the first two years of President Bill Clinton's
second term.
C. approximately 6.4% per year.
D. negative because of the 2001 recession.
5. President Obama's 2009 fiscal stimulus package included
A. tax increases for individuals
B. a reduction in unemployment benefits
C. increased federal borrowing from state and local governments
D. increased spending on "shovel-ready" infrastructure projects
6. The Federal Reserve governs U.S.
A. monetary policy.
B. discretionary fiscal policy.
C. nondiscretionary fiscal policy.
D. Supreme Court nominations.
7. Which of the following are goals for monetary policy?
A. controlling world oil prices
B. preventing boom and bust cycles in the economy
C. monitoring corruption in the securities industry
D. controlling rents
ADCP 310 Fall 2010/Week 3 Quiz
8. M1 is the total amount of ________ in the economy.
A. coin
B. paper currency and coin
C. checking accounts, coin and paper currency
D. paper currency only
9. M2 is the total amount of ____________________ in the economy.
A. coin and paper currency
B. coin, paper currency, and savings accounts
C. coin, paper currency, savings accounts, and small CDs
D. coin, paper currency, savings accounts, small CDs, and large CDs
10. M3 is the total amount of ____________________ in the economy.
A. coin and paper currency
B. coin, paper currency, and savings accounts
C. coin, paper currency, savings accounts, and small CDs
D. coin, paper currency, savings accounts, small CDs, and large CDs
11. The Federal Funds Rate is the rate at which
A. the Federal Reserve lends money to the US government.
B. the Federal Reserve lends money to member banks.
C. banks lend money to the Federal Reserve.
D. banks lend to one another to meet reserve requirements.
12. The point of Open Market Operations is to
A. influence stock prices.
B. increase or decrease the money supply so as to influence interest rates.
C. increase or decrease the value of gold as to influence the value of foreign currency.
D. influence oil prices.
13. If the Federal Reserve wished to decrease interest rates using open market operations it
would
A. buy US government securities.
B. sell US government securities.
C. buy gold.
D. buy corporate stocks.
14. With a reserve ratio of 10%, the banking system can create ____ with each dollar of
deposits.
A. $1
B. $2
C. $5
D. $10
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ADCP 310 Fall 2010/Week 3 Quiz
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15. Money is useful because it serves as a
A. medium of exchange
B. stimulus to the printing industry
C. good memorial to national leaders
D. never wear out
16. Money is useful because it serves as a
A. store of value
B. stimulus to the printing industry
C. good memorial to national leaders
D. never wear out
17. Contractionary monetary policy would shift the
A. aggregate demand curve to the right.
B. aggregate demand curve to the left.
C. aggregate supply curve up and to the left.
D. aggregate supply curve down and to the right.
18. From the early 1980's through 2000 the Federal Reserve's primary focus was on
A. ensuring rapid growth.
B. controlled inflation and stable growth.
C. stable employment through monetary expansion.
D. keeping gold prices stable.
19. If money is moved from a consumer savings account into a consumer checking account,
A. M1 and M2 both decrease.
B. M1 increases and M2 remains unchanged.
C. M1 decreases and M2 increases.
D. M1 and M2 both increase.
20. Federal Reserve increases in the Federal Funds rate in 2005 had little immediate impact upon
the overheated housing market, because
A. long-term interest increased as short-term interest rates increased.
B. long-term interest rates and short-term interest rates do not always move in lockstep.
C. the yield curve became more steeply upward-sloping.
D. all of the above.
21. If interest rates near zero fail to stimulate borrowing, the economy is in a
A. money pit
B. liquidity trap
C. hyperinflation
D. housing bubble
ADCP 310 Fall 2010/Week 3 Quiz
22. Federal tax dollars can be spent only if
A. Congress passes a law that the President signs.
B. Congress passes a law and overrides a veto.
C. Congress passes a law and fails to override the veto.
D. a) or b)
23. A continuing resolution allows spending to go on
A. as long as the resolution states.
B. for no longer than a week.
C. for no longer than a year.
D. for no longer than a day.
24. In planning for a Fiscal year which of the following is supposed to happen first
A. an appropriations bill.
B. a continuing resolution.
C. a budget bill.
D. a Presidential veto.
25. Laws that change the tax code must begin
A. in the House of Representatives.
B. in the Senate.
C. with the President.
D. none of these, they may begin anywhere.
26. The Fiscal Year for the Federal Government begins
A. January 1.
B. July 1.
C. October 1.
D. December 1.
27. Programs such as Social Security and Medicare
A. have to be re-authorized every year.
B. do not require re-authorization.
C. can be cut by the President without congressional approval.
D. a) and c)
28. Crowding out is the idea that
A. when government spending is increased private spending must decrease.
B. when government spending is increased in one area it must be decreased in another.
C. when private spending is increased it must be decreased in another.
D. when one entitlement recipient enters a program, another must leave.
29. Mandatory spending makes up
A. well under half of all spending.
B. just over half of all spending.
C. just under exactly half of all spending.
D. well over half of all spending.
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ADCP 310 Fall 2010/Week 3 Quiz
30. The largest single item in the Federal Budget is
A. Defense.
B. Interest on the Debt.
C. Social Security.
D. Foreign Aid.
31. Which of the following is part of non-defense discretionary spending?
A. Medicare
B. Interest on the debt
C. Social Security
D. Education and training
32. The portion of Federal Spending devoted to national defense has
A. risen constantly since 1960.
B. remained constant since 1960.
C. decreased markedly with small increases during Vietnam, the early 1980's and 2001.
D. bounced around with no apparent pattern
33. After the September 11, 2001 terrorist attacks federal government spending
A. was cut
B. increased, but at a rate much slower than it had before the attacks
C. increased, but at a rate almost exactly the same as it had before the attacks
D. increased at a rate much faster than it had before the attacks
34. The initial effect of the Troubled Asset Relief Program (TARP) upon the federal budget was
to
A. allow federal spending to increase by as much as $750 billion
B. eliminate the corporate income tax liabilities of major oil companies
C. eliminate all opportunities for "logrolling" in the Congress
D. all of the above
35. The impending retirement of aging Baby Boomers is quite likely to re-establish the trend of
A. discretionary spending becoming an ever-larger share of total federal spending
B. mandatory spending becoming an ever-smaller share of total federal spending
C. mandatory spending becoming an ever-larger share of total federal spending
D. discretionary and mandatory spending becoming virtually indistinguishable
36. The Obama Stimulus Plan of 2009 consisted of
A. $787 billion in tax cuts
B. tax cuts, federal spending increases and aid to states
C. $787 billion in immediate federal spending increases
D. income tax rebate checks delivered to households in key states
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ADCP 310 Fall 2010/Week 3 Quiz
37. The pattern of the 1930's through the middle 1990's was
A. deficits interspersed with a few years of surplus.
B. deficits each and every year.
C. surpluses each and every year.
D. surpluses interspersed with a few years of deficits.
38. Prior to 1950, for most of the years in which there were deficits we were also
A. under Republican Presidents.
B. at war.
C. under Democratic Presidents.
D. in financial panics or depressions.
39. The deficit that showed the biggest increase after the events of 2001 through 2004 (the first
and second Bush tax cuts, the recession of 2001 and the war of terrorism) was the
A. on-budget side
B. off-budget side
C. must-budget side
D. far side
40. In inflation adjusted terms, the largest deficits in the twentieth century
A. resulted from the Vietnam War.
B. resulted from World War II.
C. were caused by huge tax cuts in the 1980's.
D. resulted from spending increases in the 1990's.
41. In which of the decades below was the inflation-adjusted deficit largest
A. the 1950s
B. the 1960s
C. the 1970s
D. the 1980s
42. In which of the decades below was the deficit as a percentage of GDP the largest
A. the 1950s
B. the 1960s
C. the 1970s
D. the 1980s
43. Which of the following countries increased its holding of U.S. government debt by the
greatest percentage between 1995 and 2005?
A. Canada
B. Saudi Arabia
C. China
D. the United Kingdom
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ADCP 310 Fall 2010/Week 3 Quiz
44. Projections of the deficit, surplus and debt picture are
A. usually accurate as many as thirty years out.
B. rarely accurate even year to year.
C. highly sensitive to changes in the economy.
D. b) and c)
45. Following the financial collapse in late 2008, the deficit increased in part because of the
A. weakened state of the economy caused increased spending on unemployment
compensation
B. high short-term interest rates and restrictive monetary policy
C. U.S. return to the gold standard
D. massive expansion of foreign aid to Central American democracies
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