Glencoe - Economics - Principles and Practices - Chapters 11 to 20 - True/False

True/False
Indicate whether the sentence or statement is true or false. 

__F__  1.  Wampum was a form of currency used in colonial Virginia.

__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__  5.  Fiat money has no inherent worth. 

__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__  8.  Half of all savings and loan associations went out of business during the 1980s. 

__T__  9.  Bond ratings can be used as a measure of the bond's risk. 

__T__  10.  Money markets have assets w ith maturities of less than one year.

__F__  11.  Assets traded in capital markets are those that have to be redeemed by the issuer.

__T__  12.  When consumers build up a lot of debt, they may choose to apply for a bill consolidation loan that they can
use to pay off their other bills.

__F__  13.  When people invest in mutual funds, they are making loans to banks and their investments are insured by the
FDIC.

__F__  14.  The risk of investing in junk bonds is usually lower than the risk of investing in CDs.

__T__  15.  A 401(k) plan is a tax-deferred investment and savings plan that serves as a personal pension plan for
employees. 

__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
of $100.

__T__  17.  A Treasury bill usually matures in 13 to 52 weeks and can be purchased for a minimum amount of $10,000.

__F__  18.  The American Stock Exchange is the oldest, largest, and most prestigious of the organized stock exchanges in
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
slowed.

__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.

__F__  51.  Damaged family values is one example of a social cost of economic 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
decisions. 

__F__  55.  Demand-side policies were the hallm ark of President Reagan's administration. 

__F__  56.  Automatic stabilizers are critical to the success of supply-side policies.

__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
efficiently.

__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
trade.

__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. 

__F__  67.  When the dollar falls in relation to foreign currencies, American consumers can buy imported goods more
cheaply.

__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
Union. 

__F__  70.  The Soviet Union underwent a forced transformation from an agricultural to an industrial economy under
Mikhail Gorbachev.

__T__  71.  The process of collectivization contributed to the starvation of millions of Soviet peasants during the 1930s. 

__F__  72.  Boris Yeltsin introduced the policy of perestroika to restructure the Soviet government and economy in the
1980s. 

__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. 

__F__  79.  The World Bank suggests that politicians in deve loping countries should make the WHAT, HOW, and FOR
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. 

__F__  88.  The World Bank urges developing countries to utilize deficit spending to finance industrialization and the
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
expropriation. 

__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.