Indicate whether the sentence or statement is true or false.
__T__ 2. Benjamin Franklin and Alexander Hamilton devised the monetary system used in the United States today.
__F__ 3. To be a successful medium of exchange money must exist in an unlimited supply.
__T__ 4. Spanish pesos circulated in the early United States economy partly due to the triangular trade.
__T__ 6. Despite the Federal Reserve System, massive banking failures occurred during the Great Depression.
__F__ 7. The National Banking Act created the currency called greenbacks.
__T__ 9. Bond ratings can be used as a measure of the bond's risk.
__F__ 11. Assets traded in capital markets are those that have to be redeemed by the issuer.
use to pay off their other bills.
__F__ 14. The risk of investing in junk bonds is usually lower than the risk of investing in CDs.
__F__ 16. If a bond's par value is $1,000 and its coupon is 5 percent, the investor will receive an annual coupon payment
the United States.
__T__ 19. The S&P 500 reports on stocks listed on the NYSE, AMEX, and OTC markets.
__T__ 20. When people invest in the futures markets, they are usually investing in livestock and grain.
__F__ 21. The term net immigration refers to the effect on the population of people moving into the country.
__T__ 22. The analysis of population trends is important to political leaders, community leaders, and businesses.
__F__ 23. The current population pyramid shows a bulge in the middle, reflecting the large number of people born
during the baby boom of the 1980s and 1990s.
__F__ 24. The capital-to-labor ratio shows the average cost of workers to businesses.
__T__ 25. The four factors of production influence economic growth.
__F__ 26. Long-term economic growth is measured most accurately by current GDP.
__T__ 27. Increasing labor productivity helps promote economic growth and raise living standards.
__F__ 28. Gross Domestic Product is an index that measures price changes by domestic producers.
__T__ 29. Net national product and Gross National Product are two measures of national income.
__T__ 30. The consumer sector is the largest part of the macroeconomy.
__F__ 31. The market basket is a year that serves as the basis of comparison in a price index.
__F__ 32. GDP that has been adjusted to remove inflation is called current GDP.
__T__ 33. Although the population of the United States has grown steadily since colonial times, the rate of growth has
__T__ 34. Factors affecting population growth include fertility rate, life expectancy, and net immigration.
__F__ 35. The worst downturn of the business cycle in the United States occurred during the Cold War.
__T__ 36. All of the recessions between World War II and the 1980s took place fairly regularly.
__F__ 37. Business fluctuations are systematic increases and decreases in real GDP.
__F__ 38. The two phases of the business cycle are peaks and troughs.
__T__ 39. Econometric models are used to predict future economic activity.
__T__ 40. The unemployment rate does not take into account the number of part-time workers who want to have full-time jobs.
__F__ 41. Full employment is reached when the unemployment rate drops below 7 percent.
__T__ 42. Under Regulation Z, the Fed can extend truth-in-lendi ng disclosures to benefit millions of individuals when
they borrow money or make purchases.
__T__ 43. The balance sheet discloses all the assets and liabilities of a bank on one form.
__F__ 44. Banks may use excess reserves to purchase federal securities, which are secure but cannot be quickly
converted to cash.
__T__ 45. The Fed can implement its monetary policy by buying and selling government securities.
__F__ 46. If the Fed increases the interest rate, it will increase the supply of money.
__T__ 47. A long-run effect of increasing the money supply can be inflation.
__T__ 48. The real rate of interest is the interest rate minus the rate of inflation.
__T__ 49. Economic instability has high economic and social costs.
__T__ 50. The discomfort index is one measure of the economic costs of instability.
__T__ 52. Strong economic health is necessary for a co mmunity to have strong mental and social health.
__F__ 53. Stagflation is a combination of inflation and unemployment.
__T__ 54. Fiscal policies are designed to affect the aggregate demand curve through federal spending and taxing
__F__ 55. Demand-side policies were the hallm ark of President Reagan's administration.
__T__ 57. Health inspections on food products limit trade between nations.
__F__ 58. Free traders often argue that new or emerging industries should be protected from foreign competition.
__T__ 59. The use of trade barriers to protect domestic industries and jobs works only if other countries do not retaliate
with their own trade barriers.
__T__ 60. The World Trade Organization recently replaced the General Agreement on Tariffs and Trade.
__F__ 61. Imports are goods and services that one country sells to other countries.
__T__ 62. A country has a comparative advantage in trade when it is able to produce a product relatively more
__T__ 63. Free traders favor few or even no trade restrictions.
__F__ 64. Congress passed the Smoot-Hawley Tariff in 1930 and successfully protected U.S. industry while increasing
__T__ 65. The foreign exchange rate is the price of one country's currency in terms of another country's currency.
__T__ 66. When President Nixon refused to redeem foreign-held dollars for gold in 1971, the world went from a fixed
exchange rate to a floating exchange rate.
__T__ 68. An advantage of flexible exchange rates is that trade deficits tend to automatically correct themselves.
__T__ 69. Lenin's New Economic Policy (NEP) was designed to reintroduce some capitalist methods in the Soviet
__F__ 70. The Soviet Union underwent a forced transformation from an agricultural to an industrial economy under
__T__ 71. The process of collectivization contributed to the starvation of millions of Soviet peasants during the 1930s.
__F__ 73. All capitalist countries prac tice the same form of capitalism.
__T__ 74. Japan experienced outstanding economic growth during the 1970s and 1980s.
__F__ 75. North Korea is one of the economically successful Asian Tigers.
__F__ 76. During the 1990s, Sweden restructured its economy to pure capitalism.
__F__ 77. Takeoff is the first stage of economic development.
__T__ 78. The World Bank recommends that industrialized nations reduce trade barriers to promote the growth of export
industries in developing countries.
WHOM allocation decisions.
__T__ 80. Traditionally, the majority of United States foreign aid has been granted to achieve political aims.
__T__ 81. South Korea is one of the most successful developing nations.
__F__ 82. The European Union is an example of a cartel.
__T__ 83. Ten ASEAN countries are working to develop a free trade area by 2008.
__F__ 84. The gap between industrialized and developing countries has narrowed markedly in recent decades.
__T__ 85. Population growth is one major obstacle to economic development.
__T__ 86. The five stages of economic development are: primitive equilibrium, breaking with primitive equilibrium,
takeoff, semidevelopment, and high development.
__T__ 87. The World Bank urges industrialized nations to reduce trade barriers with developing nations.
building of necessary infrastructure.
__T__ 89. In many cases, internal funds may be the only source of capital available to developing nations.
__F__ 90. Developing nations are more successful in attracting foreign private investment if they have a history of
__T__ 91. Member nations of OPEC have been able to take advantage of a natural monopoly.
__T__ 92. The traditional response to pollution problems has been to legislate regulations.
__T__ 93. Pollution taxes are designed to give firms the incentive not to pollute.
__F__ 94. According to an economist, a resource becomes scarce when it is polluted.
__T__ 95. People have become increasingly concerned about pollution in recent years.
__T__ 96. The National Council on Economic Education recomm ends that the first step in economic decision making
should be to state the problem or the issue.
__T__ 97. Cost-benefit analysis can be used to make choices among economic goals.
__F__ 98. Socialism is the dominant economic force in the world today.
__F__ 99. Capitalism has remained the same for the past 100 years.
__T__ 100. Many economists believe capitalism is the economic system best able to accommodate the unforeseen events
of the future.