Everett Averhart
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Everett Averhart
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Economics Final Exam - Spring 2015 Undergrad

Question 1 of 63

1

Business Cycles are__________________________________?

Select one or more of the following:

  • alternating rises and declines in the level of economic activity.

  • alternating rises and declines in the level of economic activity

Explanation

Question 2 of 63

1

What are the 4 components of a business cycle? (Separate each item by a semi-colon, followed by a space)

Select one or more of the following:

  • peak; recession; trough; expansion

  • peak; recession; trough;

Explanation

Question 3 of 63

1

At a peak____________________________?

Select one or more of the following:

  • business activity has reached a temporary maximum.

  • business activity has reached a temporary maximum

Explanation

Question 4 of 63

1

What is a recession?

Select one or more of the following:

  • A recession is a period of decline in total output, income, and employment.

  • a period of decline in total output, income, and employment

Explanation

Question 5 of 63

1

In the trough of the recession or depression,______________________________.

Select one or more of the following:

  • output and employment bottom out at their lowest levels

  • output and employment "bottom-out" at their lowest levels

Explanation

Question 6 of 63

1

A recession is usually followed by ____________________________________.

Select one or more of the following:

  • a recovery and expansion, a period in which real GDP, income, and employment rise.

  • a recovery and expansion, a period in which real GDP, income, and employment rise

Explanation

Question 7 of 63

1

Define Inflation.

Select one or more of the following:

  • Inflation is a rise in the general level of prices.

  • Inflation is a rise in the general level of prices

Explanation

Question 8 of 63

1

How is inflation measured?

Select one or more of the following:

  • according to the Consumer Price Index

  • According to the Consumer Price Index

Explanation

Question 9 of 63

1

What are the two types of inflation?

Select one or more of the following:

  • demand pull inflation and cost push inflation

  • demand-pull inflation and cost-push inflation

Explanation

Question 10 of 63

1

How many tools of monetary control does the Fed have?

Select one or more of the following:

  • 4

  • four

Explanation

Question 11 of 63

1

The Fed has four main tools of monetary control it can use to alter the reserves of commercial banks. List them. (Separate each answer by a semi-colon, followed by a space.)

Select one or more of the following:

  • open market operations; the reserve ratio; the discount rate; interest on reserves

  • open-market operations; the reserve ratio; the discount rate; interest on reserves

Explanation

Question 12 of 63

1

List the three types of unemployment. (Separate each answer by a semi-colon, followed by a space.)

Select one or more of the following:

  • frictional; structural; cyclical

  • structural; frictional; cyclical

Explanation

Question 13 of 63

1

Define frictional unemployment.

Select one or more of the following:

  • A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs

  • unemployed workers between jobs

Explanation

Question 14 of 63

1

Define Structural unemployment.

Select one or more of the following:

  • unemployment of workers whose skills are not demanded by employers

  • workers who lack sufficient skill to obtain employment

  • workers who cannot easily move to locations where jobs are available

  • unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available

Explanation

Question 15 of 63

1

Firms that produce these goods are most affect by the business cycle.

Select one or more of the following:

  • durable goods

  • durable-goods

Explanation

Question 16 of 63

1

Why are firms that produce durable goods most affect by the business cycle?

Select one or more of the following:

  • because people forgo the opportunity to buy these goods in order to buy goods of necessity

  • because people forgo the opportunity to buy durable goods in order to buy goods of necessity

  • because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non durable goods

  • because people forgo the opportunity to buy durable goods in order to buy goods of necessity which would fall under the category of non durable goods

  • because people forgo the opportunity to buy durable goods in order to buy goods of necessity which would fall under the category of non-durable goods

  • because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non-durable goods

Explanation

Question 17 of 63

1

Firms that produce these goods are the least affected by the business cycle.

Select one or more of the following:

  • non-durable goods

  • non durable goods

Explanation

Question 18 of 63

1

Explain the cyclical impact of non-durable and durable goods.

Select one or more of the following:

  • Firms that produce durable goods are affected most by the business cycle because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non-durable goods.

  • firms that produce durable goods are affected most by the business cycle because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non-durable goods.

  • Firms that produce durable goods are affected most by the business cycle because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non durable goods.

  • firms that produce durable goods are affected most by the business cycle because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non durable goods.

  • Firms that produce durable goods are affected most by the business cycle because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non-durable goods

  • firms that produce durable goods are affected most by the business cycle because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non-durable goods

  • Firms that produce durable goods are affected most by the business cycle because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non durable goods

  • firms that produce durable goods are affected most by the business cycle because people forgo the opportunity to buy these goods in order to buy goods of necessity which would fall under the category of non durable goods

Explanation

Question 19 of 63

1

List 3 examples of durable goods. (Separate each answer by a semi-colon, followed by a space.)

Select one or more of the following:

  • Automobiles; Computers; Refrigerators

  • automobiles; computers; refrigerators

Explanation

Question 20 of 63

1

List 3 examples of non-durable goods. (Separate each answer by a semi-colon, followed by a space.)

Select one or more of the following:

  • Food; Clothing; Medical Services

  • food; clothing; medical services

Explanation

Question 21 of 63

1

What are the five causes of business cycles? (Separate each answer by a semi-colon, followed by a space.)

Select one or more of the following:

  • Irregular innovation; Productivity changes; Monetary factors; Political events; Financial instability

  • irregular innovation; productivity changes; monetary factors; political events; financial instability

  • Irregular Innovation; Productivity Changes; Monetary Factors; Political Events; Financial Instability

  • IPMPF

  • I.P.M.P.F.

Explanation

Question 22 of 63

1

Define Monetary Policy.

Select one or more of the following:

  • Monetary policy is policy which is enacted by the Federal Open Market Committee that consists of deliberate changes in the money supply to influence interest rates and thus the total level of spending in the economy.

  • Monetary policy is policy which is enacted by the Federal Open Market Committee that consists of deliberate changes in the money supply to influence interest rates and thus the total level of spending in the economy

  • policy enacted by the Federal Open Market Committee that consists of deliberate changes in the money supply to influence interest rates and thus the total level of spending in the economy

  • policy which is enacted by the Federal Open Market Committee that consists of deliberate changes in the money supply to influence interest rates and thus the total level of spending in the economy

  • policy enacted by the Federal Open Market Committee that consists of deliberate changes in the supply of money to influence interest rates and thus the total level of spending in the economy

Explanation

Question 23 of 63

1

What does (FOMC) stand for?

Select one or more of the following:

  • Federal Open Market Committee

  • federal open market committee

  • the federal open market committee

  • The Federal Open Market Committee

Explanation

Question 24 of 63

1

What is the goal of monetary policy?

Select one or more of the following:

  • The goal of monetary policy is to achieve and maintain price level stability, full employment, and economic growth.

  • The goal of monetary policy is to achieve and maintain price level stability, full employment, and economic growth

  • to achieve and maintain price level stability, full employment, and economic growth

Explanation

Question 25 of 63

1

What are two types of monetary policy enacted by the FOMC? (Separate each answer by a semi-colon, and a space.)

Select one or more of the following:

  • Expansionary Monetary Policy; Restrictive Monetary Policy

  • expansionary monetary policy; restrictive monetary policy

  • Expansionary monetary policy; Restrictive monetary policy

Explanation

Question 26 of 63

1

Describe Expansionary Monetary Policy.

Select one or more of the following:

  • Expansionary Monetary Policy is that which lowers the interest rate to bolster borrowing and spending, which will increase aggregate demand and expand real output.

  • Expansionary monetary policy is that which lowers the interest rate to bolster borrowing and spending, which will increase aggregate demand and expand real output.

  • Expansionary Monetary Policy is policy which lowers the interest rate to bolster borrowing and spending, which will increase aggregate demand and expand real output.

  • Expansionary Monetary Policy is policy which lowers the interest rate to bolster borrowing and spending, which will increase aggregate demand and expand real output

  • Expansionary Monetary Policy is that which lowers the interest rate in order to bolster borrowing and spending, which will increase aggregate demand and expand real output.

  • Expansionary Monetary Policy is that which lowers the interest rate in order to bolster borrowing and spending, which will increase aggregate demand and expand real output

Explanation

Question 27 of 63

1

Describe Restrictive Monetary Policy.

Select one or more of the following:

  • Restrictive Monetary Policy is that which will increase the interest rate to reduce borrowing and spending, which will curtail the expansion of aggregate demand and hold down price-level increases.

  • Restrictive Monetary Policy is that which will increase the interest rate to reduce borrowing and spending, which will curtail the expansion of aggregate demand and hold down price-level increases

  • Restrictive Monetary Policy is policy which will increase the interest rate in order to reduce borrowing and spending, which will decrease aggregate demand and hold down price level increases.

  • Restrictive Monetary Policy is policy which will increase the interest rate to reduce borrowing and spending, which will decrease aggregate demand and hold down price level increases.

  • Restrictive Monetary Policy is policy which will increase the interest rate in order to reduce borrowing and spending, which will decrease aggregate demand and hold down price level increases

  • Restrictive Monetary Policy is that which will increase the interest rate in order to reduce borrowing and spending, which will decrease aggregate demand and hold down price level increases.

  • Restrictive Monetary Policy is policy which will increase the interest rate in order to reduce borrowing and spending, which will curtail the expansion of aggregate demand and hold down price level increases.

Explanation

Question 28 of 63

1

Expansionary Monetary Policy is enacted when the economy is doing bad.

Select one of the following:

  • True
  • False

Explanation

Question 29 of 63

1

The FOMC enacts a Restrictive Monetary Policy when the economy is rapidly expanding.

Select one of the following:

  • True
  • False

Explanation

Question 30 of 63

1

Define Fiscal Policy.

Select one or more of the following:

  • Fiscal Policy is that which consists of deliberate changes in government spending and tax collections designed to achieve full employment, control inflation, and encourage economic growth.

  • Fiscal Policy is that which consists of deliberate changes in government spending and tax collections designed to achieve full employment, control inflation, and encourage economic growth

  • Fiscal policy is policy which consists of deliberate changes in government spending and tax collections in order to achieve full employment, control inflation, and encourage economic growth.

  • Fiscal policy is that which consists of deliberate changes in government spending and tax collections designed to achieve full employment, control inflation, and encourage economic growth

  • Fiscal policy is that which consists of deliberate changes in government spending and tax collections designed to achieve full employment, control inflation, and encourage economic growth.

  • Fiscal Policy is policy which consists of deliberate changes in government spending and tax collections in order to achieve full employment, control inflation, and encourage economic growth

Explanation

Question 31 of 63

1

Identify the two types of fiscal policy enforced by the federal government. (Separate each answer by a semi-colon, and a space.)

Select one or more of the following:

  • Expansionary Fiscal Policy; Contractionary Fiscal Policy

  • expansionary fiscal policy; contractionary fiscal policy

  • Expansionary fiscal policy; Contractionary fiscal policy

  • Expansionary and Contractionary fiscal policy

Explanation

Question 32 of 63

1

Who enacts fiscal policy?

Select one or more of the following:

  • The government

  • the government

Explanation

Question 33 of 63

1

The Government enacts Restrictive Fiscal Policy

Select one of the following:

  • True
  • False

Explanation

Question 34 of 63

1

The tools of fiscal policy include_____________________________.

Select one or more of the following:

  • The tools of fiscal policy include increasing or decreasing government spending, increasing or decreasing taxes, or some combination of the two. By manipulating these aspects of the economy the government can increase or decrease aggregate demand, and/or raise real GDP, as well as, inflation.

  • increasing or decreasing governmental spending, increasing or decreasing taxes, or some combination of the two, By manipulating these aspects of the economy, the government can increase or decrease aggregate demand and/or raise real GDP, as well as, inflation.

  • increasing or decreasing governmental spending, increasing or decreasing taxes, or some combination of the two. By manipulating these aspects of the economy the government can increase or decrease aggregate demand thereby raising real GDP or lowering or eliminating inflation.

Explanation

Question 35 of 63

1

What are the limitations to fiscal policy? (Separate each by a semi-colon, followed by a space.)

Select one or more of the following:

  • recognition lag; administrative lag; operational lag

  • Recognition lag; Administrative lag; Operational lag

Explanation

Question 36 of 63

1

Describe the recognition lag.

Select one or more of the following:

  • The recognition lag is the time between the beginning of recession or inflation and the certain awareness that it is actually happening.

  • The recognition lag is the time between the beginning of recession or inflation and the certain awareness that it is actually happening

  • the recognition lag is the time between the initial beginning of recession or inflation and the certain awareness that it is happening.

Explanation

Question 37 of 63

1

Describe the administrative lag.

Select one or more of the following:

  • The administrative lag is represented by the time fiscal action is initially needed and the time action is actually taken.

  • The administrative lag is represented by the time fiscal action is initially needed and the time action is actually taken

  • the administrative lag occurs between the time fiscal policy is initially needed and the time when action is actually taken

Explanation

Question 38 of 63

1

Describe the operational lag.

Select one or more of the following:

  • The operational lag occurs between the time fiscal policy is taken and the time that action actually affects output, the employment rate, or the price level.

  • The operational lag occurs between the time fiscal action is taken and the time that action actually affects output, the employment rate, and the price level.

  • The operational lag occurs between the time fiscal action is initially taken and the time that action actually affects output, the employment rate, and the price level.

  • The operational lag occurs between the time fiscal action is initially taken and the time that action actually affects output, the employment rate, and the price level

Explanation

Question 39 of 63

1

Describe the U.S. National Debt.

Select one or more of the following:

  • The U.S. national debt or public debt is the accumulation off all past federal deficits and surpluses.

  • The U.S. national debt or public debt is an accumulation of all past federal deficits and surpluses

  • The U.S. national debt, otherwise known as the public debt, is an accumulation of all past federal deficits and surpluses.

  • The U.S. national debt is an accumulation of all past federal deficits and/or surpluses

Explanation

Question 40 of 63

1

As of 2015, what is the U.S. national debt?

Select one or more of the following:

  • $18 trillion

  • As of 2015, the public debt is $18 trillion.

  • As of 2015, the public debt is $18 trillion

Explanation

Question 41 of 63

1

Assess the actual burden of the national debt.

Select one or more of the following:

  • The primary burden of the debt is the interest accruing on the bonds sold to finance the debt.

  • The primary burden of the debt is the interest accruing on the bonds sold to finance the debt

  • The interest accruing on the bonds sold to finance the debt is the primary burden of the national debt.

  • The primary burden of the national debt is the interest accruing on the bonds that are sold to finance the debt.

Explanation

Question 42 of 63

1

Discuss the issue of government securities as it relates to the national debt.

Select one or more of the following:

  • The distribution of government securities is highly uneven.

  • The distribution of government securities is highly uneven

  • Government securities are severely unevenly distributed.

  • The distribution of government securities is very uneven.

Explanation

Question 43 of 63

1

Discuss the relevance of interests as it pertains to the public debt.

Select one or more of the following:

  • The current public debt necessitates annual interests payments of $360 billion.

  • The current public debt necessitates annual interest payments of $360 billion

  • the current national debt necessitates annual interest payments of $360 billion

  • The current national debt necessitates annual interest payments of $360 billion.

Explanation

Question 44 of 63

1

Discuss the relevance of foreign institutions and citizens as they pertain to the U.S. national debt.

Select one or more of the following:

  • The 33 percent of the U.S. public debt held by citizens and institutions of foreign countries is an economic burden to Americans.

  • The 33 percent of the U.S. national debt held by citizens and institutions of foreign countries is an economic burden to Americans

  • Citizens and institutions of foreign countries hold approximately 33 percent of the U.S. national debt. This is an economic burden to Americans

  • The 33 percent of the U.S. national/ public debt held by citizens and institutions of foreign countries is an economic burden to Americans

Explanation

Question 45 of 63

1

Discuss how the continual refinancing of the U.S. national debt can impact future generations.

Select one or more of the following:

  • The continual refinancing of the large U.S. national debt can transfer a real economic burden to future generations by passing on to them a smaller stock of capital goods.

  • The continual refinancing of the large public debt can transfer a real economic burden to future generations by passing on to them a smaller stock of capital goods

  • A smaller stock of capital goods can be passed on to future generations as a result of the continual refinancing of the large public debt.

  • The continual refinancing of the huge national/public debt can transfer a real economic burden to future generations by passing on to them a smaller stock of capital goods.

Explanation

Question 46 of 63

1

Describe the federal funds rate.

Select one or more of the following:

  • The federal funds rate is the rate of interests that banks charge one another on overnight loans made from temporary excess reserves.

  • The federal funds rate is the rate of interests that banks charge one another for overnight loans made from temporary excess reserves

  • the federal funds rate is the rate of interest that banks charge other banks for overnight loans deriving from temporary excess reserves

  • the federal funds rate is the rate of interest that banks charge other banks for overnight loans taken from temporary excess reserves.

Explanation

Question 47 of 63

1

How does the Fed directly influence the federal funds rate?

Select one or more of the following:

  • The Fed, by using its influence on the Federal Reserve Bank of New York, can force it to undertake whatever open- market operations may be necessary to achieve and maintain the targeted rate.

  • The Fed, by using its influence on the Federal Reserve Bank of New York, can force it to undertake whatever open-market operations may be necessary to achieve and maintain the targeted rate

  • By using its influence on the Federal Reserve Bank of New York, the Fed can force it too undertake whatever open-market operations necessary to achieve and maintain the targeted rate.

  • In order to achieve and maintain the targeted rate, the Fed, by using its influence on the Federal Reserve Bank of New York, can force it to undertake whatever open-market operation it deems necessary.

Explanation

Question 48 of 63

1

Explain the effectiveness of Monetary Policy.

Select one or more of the following:

  • The effectiveness of monetary policy arises from its speed and flexibility as a process. Monetary policy also gains effectiveness from the fact that its isolated from political pressures.

  • The effectiveness of monetary policy arises from its speed and flexibility as a process. Monetary policy also gains effectiveness from the fact that its isolated from political pressures

  • The speed and flexibility of monetary policy are the main forces behind its effectiveness. It also gains considerable effectiveness from the fact that it is isolated from political pressures.

  • Monetary policy is made effective by its speed and flexibility as a process. Its also made effective by the fact that it is isolated from political pressures.

Explanation

Question 49 of 63

1

How many shortcoming does monetary policy involve?

Select one or more of the following:

  • 4

  • four

Explanation

Question 50 of 63

1

What are the shortcomings of monetary policy?

Select one or more of the following:

  • The shortcomings of monetary policy include a recognition lag and an operational lag. Other shortcomings include: Cyclical asymmetry; Liquidity trap

  • The shortcomings of monetary policy include a recognition lag and an operational lag. Other shortcomings include: Cyclical asymmetry; Liquidity trap.

  • a recognition lag; an operational lag; liquidity trap; cyclical asymmetry.

  • a recognition lag; an operational lag; cyclical asymmetry; liquidity trap

Explanation

Question 51 of 63

1

In the aggregate, households increase their spending as their ______________________________rises, and spend a larger portion of a _________________ disposable income than that of a _____________________ disposable income.

Select one of the following:

  • income; large; small

  • want; unneeded; needed

  • income; needed; small

  • disposable income; large; small

  • interest rate; small; large

  • disposable income; small; large

  • disposable loan; small; large

  • opportunity; unearned; earned

Explanation

Question 52 of 63

1

If households consume a smaller and smaller proportion of DI as DI increases, then ________________________________________________________________.

Select one or more of the following:

  • they must be saving a larger and larger proportion.

  • they must be saving a larger and larger proportion

  • they must be saving a larger and larger proportion of DI.

  • they must be saving a larger and larger proportion of DI

Explanation

Question 53 of 63

1

The more money households receive, the more they are able to _____________________________________ and the less they are encouraged to __________________________.

Select one of the following:

  • save; spend

  • spend; invest

  • produce; consume

  • consume; save

  • consume; produce

  • produce; invest

  • invest; spend

  • shop; buy

  • invest; produce

Explanation

Question 54 of 63

1

Define Average Propensity to Consume.

Select one or more of the following:

  • Average propensity to consume is the fraction, or percentage, of total income that is consumed

  • Average propensity to consume is the fraction, or percentage, of total income that is consumed.

  • Average Propensity to Consume is that fraction, or percentage, of income that is consumed

  • Average propensity to consume is the percentage, or fraction of income that is consumed

Explanation

Question 55 of 63

1

Define Average propensity to save.

Select one or more of the following:

  • Average propensity to save is that fraction, or percentage, of total income that is saved.

  • Average propensity to save is that fraction of total income that is saved

  • Average propensity to save is that percentage of total income that is saved.

  • Average propensity to save is represented by that fraction or portion of total income that is saved

Explanation

Question 56 of 63

1

_________________________________________________________________________ is called the marginal propensity to consume.

Select one or more of the following:

  • the proportion, or fraction, or any change in income consumed

  • The proportion, or fraction, or any change in income consumed

  • The proportion, fraction, or any change in the amount of income consumed

  • The proportion, or fraction, or any change in the amount if income consumed

Explanation

Question 57 of 63

1

Define Marginal Propensity to Consume.

Select one or more of the following:

  • the MPC is the ratio of a change in consumption to a change in the income that caused the consumption change

  • The MPC is the ratio of change in consumption to a change in the income that caused the consumption change.

  • The Marginal Propensity to Consume is the ratio of a change in consumption to a change in the income that caused the consumption change

  • The Marginal Propensity to Consume is the ratio of change in consumption to a change in the income that caused the change in consumption

Explanation

Question 58 of 63

1

What determines the cost of investment?

Select one or more of the following:

  • The real interest rate determines the cost of investment.

  • the real interest rate determines the cost of investment.

  • the cost of investment is determined by the real interest rate

  • the real interest rate determines the cost of investment

Explanation

Question 59 of 63

1

What does the interest rate represent?

Select one or more of the following:

  • the interest rate represents either the cost of borrowing funds or the opportunity cost of investing your own funds which is forgone

  • the interest rate represents, either the cost of borrowing funds, or the opportunity cost of investing your own funds, which is forgone.

  • the interest rate represents either the opportunity costs of investing your own funds, which is forgone, or the cost of borrowing money.

  • the interest rate represents either the cost of borrowing money, or the opportunity costs of investing your own money, which is forgone.

Explanation

Question 60 of 63

1

Explain the multiplier effect.

Select one or more of the following:

  • the multiplier effect is when changes ripple through the economy to generate even larger changes in real GDP

  • the multiplier effect is when changes ripple through the economy to generate even larger changes in real GDP.

  • The multiplier effect is when changes ripple through the economy to generate even larger changes in GPD

  • the multiplier effect is when changes ripple through the economy with the effect of even larger changes which occur in real GDP

Explanation

Question 61 of 63

1

Multiplier effect equals______________________.

Select one or more of the following:

  • Change in real GDP/ initial change in spending

  • Change in real GDP / initial change in spending.

  • the change in real GDP/ the initial change in spending

  • the change in real GDP / initial change in spending

Explanation

Question 62 of 63

1

change in real GDP equals___________________________________

Select one or more of the following:

  • initial change in spending x multiplier

  • the initial change in spending x multiplier

  • multiplier x initial change in spending

  • the multiplier x initial change in spending

Explanation

Question 63 of 63

1

Why is the initial change in spending usually associated with investment during the multiplier effect?

Select one or more of the following:

  • The initial change in spending is usually associated with investment because it is so volatile. but changes in consumption are also subject to the multiplier effect .

  • the initial change in spending is usually associated with investment because it is so volatile. But, changes in consumption which is unrelated to income are also subject to the multiplier effect.

  • The initial change in spending is usually associated with investment because it is so volatile but changes in consumption are also subject to the multiplier effect.

Explanation

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