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Practice Econ 3

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Econ 101 Quiz on Practice Econ 3, created by mjheg on 05/05/2013.
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Quiz by mjheg, updated more than 1 year ago
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Created by mjheg over 11 years ago
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Question 1

Question
If, in the best case scenario, increased government spending were used to revive the economy from a recession, the increased spending would
Answer
  • be offset by a decrease in inflation
  • be a little more than the fall in consumer confidence in order to help make up for lost GDP
  • not need to be as large as the fall in consumer consumption
  • be exactly the same as the fall in consumer consumption.

Question 2

Question
In what way are monetary and fiscal policies similar?
Answer
  • They both involve borrowing from the public
  • They are both somewhat ineffective when it comes to combating real shocks
  • They both target the aggregate demand curve to combat the business cycle
  • All of these answers are correct

Question 3

Question
Mistimed contractionary fiscal policy can cause
Answer
  • a recession
  • inflation
  • a real shock
  • rising interest rates

Question 4

Question
Government spending becomes a more effective policy tool when
Answer
  • consumers are too pessimistic and not spending
  • interest rates in the economy are rising simultaneously
  • the government raises taxes to finance spending
  • the economy is above the Solow growth curve

Question 5

Question
An increase in government spending growth will cause inflation to fall in
Answer
  • the short run
  • the long run
  • both the short run and the long run
  • neither the short run nor the long run

Question 6

Question
An increase in government spending growth will cause the AD curve to
Answer
  • shift outward
  • shift inward
  • shift outward and then inward
  • remain unchanged

Question 7

Question
If the government increases its spending, financing methods that can cause crowding out include 1)Selling Bonds 2)Raising corporate investment taxes 3)raising individual income taxes
Answer
  • 1,2
  • 2,3
  • 2 only
  • none of the options
  • 1,2,3

Question 8

Question
The largest component of GDP is
Answer
  • consumption
  • investment
  • government spending
  • imports

Question 9

Question
When consumers reduce spending, the reduction in velocity of money is split between
Answer
  • decrease in inflation and decrease growth
  • decrease in inflation and increase in growth
  • decrease in the money supply and decrease in inflation
  • decrease in the money supply and decrease in growth

Question 10

Question
Examples of expansionary fiscal policy include increases I. in government spending. II. in income taxes. III. of the money supply
Answer
  • I only
  • I & II
  • II only
  • II & III

Question 11

Question
Fiscal policy is well-suited to counteract a recession or depression when
Answer
  • unemployment is low.
  • taxes are high.
  • a real negative shock occurs.
  • resources are under utilized.

Question 12

Question
A decrease in consumption growth will cause aggregate demand to
Answer
  • shift inward
  • shift outward
  • remain unchanged
  • shift inward and then outward

Question 13

Question
In a typical year, changes in government spending compared to overall spending are relatively
Answer
  • small
  • large
  • unpredictable
  • well-timed

Question 14

Question
Which would be the most liquid?
Answer
  • Small time deposits
  • small cut diamonds
  • Monet oil painting
  • money market mutual funds

Question 15

Question
When the Federal Reserve makes an open market purchase, the reserves of the banking system will
Answer
  • increase
  • decrease
  • remain constant
  • be too difficult to predict

Question 16

Question
What part of the money pyramid does the Fed have direct control over?
Answer
  • the monetary base
  • M1
  • M1 plus the monetary base
  • M2

Question 17

Question
An increase in money growth will cause inflation to increase in
Answer
  • the long run
  • the short run
  • the long run and the short run
  • neither the long run nor the short run

Question 18

Question
The members of the Board of Governors of the Federal Reserve have 14-year non-renewable terms. Thus,
Answer
  • they are somewhat insulated from the political process.
  • the chairman of the board of governors also has a 14-year term.
  • every president of a federal reserve district bank will serve at least 14 years on the BOG.
  • the New York Federal Reserve District Bank President can only serve 14 years on the FOMC.

Question 19

Question
If the Fed buys government bonds, then all of the following will likely increase except
Answer
  • M1
  • bank reserves
  • the monetary base
  • Federal Funds rate

Question 20

Question
When the Federal Reserve buys bonds, the supply curve for bond
Answer
  • shifts inward
  • shifts outward
  • sometimes shifts inward, sometimes outward
  • remains unchanged

Question 21

Question
When the Federal Reserve conducts monetary policy, the Federal Reserve usually focuses on
Answer
  • M1
  • M2
  • Federal Funds rate
  • the discount rate

Question 22

Question
Required reserves are the percent of
Answer
  • deposits that banks are required to hold as reserves.
  • reserves that banks are required to hold as reserves.
  • loans that banks are required to hold as reserves.
  • None of the answers is correct.

Question 23

Question
Which of the following assets would you classify as being most liquid?
Answer
  • small time deposits
  • demand deposits
  • a gold nugget
  • a home

Question 24

Question
Which of the following is TRUE of the structure of the Fed? I. All seven members of the Board of Governors are appointed by the President. II. The Fed is an agency of the federal government. III. The Secretary of the Treasury chairs the Federal Open Market Committee.
Answer
  • I only
  • I & II
  • I & III
  • I,II, & III

Question 25

Question
As a result of an increase in the growth rate of money supply
Answer
  • real GDP growth rate increases only in the short run, and the inflation rate increases in both the short run and the long run.
  • real GDP growth rate increases only in the long run, and the inflation rate increases only in the short run.
  • real GDP growth rate increases in both the short run and the long run, and the inflation rate increases only in the short run.
  • both the real growth rate and the inflation rate increase only in the short run.

Question 26

Question
When the Fed conducts open market operations to decrease the monetary base, real GDP growth
Answer
  • increases in the long run
  • decreases in the long run
  • decreases in both the short run and the long run
  • increases in both the short run and the long run
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