Monday, September 19, 2011

Glencoe - Economics - Principles and Practices - Chapters 11 to 20 - Multiple Choice 1

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

__A__  101.  Money that has an alternative use as an economic good is
a. commodity money.  c. wampum.
b. fiat money.  d. specie.

__D__  102.  Money loses its value when it
a.  becomes too portable.  c.  is durable.
b. is divisible.  d. becomes too plentiful.

__C__  103.  When a bank is about to collapse,
a.  up to $10,000 can be paid to depositors.
b.  up to $10,000 can be paid to shareholders.
c.  the FDIC may secretly seize the bank.
d.  the FDIC must publicly seize the bank.

__A__  104.  The FDIC was established to
a.  protect the savings of the American people.
b.  help with the financing of World War II.
c.  federalize the banking system.
d.  create a government banking monopoly.

__D__  105.  When Congress reformed the thrift industry in 1989, all of the following occurred EXCEPT
a.  the Federal Home Loan Bank Board was abolished.
b.  the FDIC assumed insurance responsibilities for the thrift industry.
c.  the government set up a temporary agency to dispose of failed thrifts.
d.  remaining S&Ls were merged with commercial banks.

__A__  106.  The problem with Continental dollars was that
a.  so much was printed they became nearly worthless.
b.  they were backed by gold and not silver.
c.  they were fiat money.
d.  they were backed by individual states.

__B__  107.  In order for money to have value, it must have all of the following characteristics EXCEPT
a. portability.  c. durability.
b. plentiful availability.  d. divisibility.

__A__  108.  Local banks in the 1800s that printed too much money were called
a. wildcat banks.  c. treasuries.
b. central banks.  d. national banks.

__D__  109.  The Federal Reserve System was established in
a. 1799.  c. 1881.
b. 1863.  d. 1913.

__B__  110.  As a result of the financial institution cr isis of the 1980s, S&Ls are now insured by the
a. FSLIC.  c. Fed.
b. FDIC.  d. National Banking System.

__A__ 111.  
To get its new Sacajawea dollar into circulation, the U.S. Mint has issued more than 500
million of the golden coins since the end of January, not only to banks, but also to Wal-Mart and Sam’s club stores.

But in what may be the greatest coin trick ever, the dollars have all but vanished. People are making them into jewelry, auctioning them off on eBay, and leaving them under pillows on behalf of the tooth fairy—anything but spending them.... The Mint expects Sacajawea to be back in circulation by year-end, when more than a billion of the dollars will have been minted and the novelty, it hopes, will have worn off.

Source: Kiplinger’s Personal Finance Magazine, July 2000.

 Based on the passage, Sacajawea dollars have disappeared because many people believe they are
a.  worth more as a commodity than as currency.
b.  worth less than a dollar.
c.  not real money.
d.  too numerous to have value as money.

__A__ 112.  
Because Russian currency is not trusted, real money plays a fairly small part in Russia’s
economy today. Most business is conducted by barter or with IOUs. For example, workers rarely receive wages in the form of cash. A bicycle factory outside the city of Perm pays its workers in bicycles! To get cash, the workers have to sell their “paychecks.” More often than not, they simply trade the bicycles for the products they want.
 According to the passage, most business in Russia is conducted without currency because Russian
currency is not
a. accepted.  c. divisible.
b. portable.  d. durable.

__C__ 113.  
United States Constitution
Article 1, Section 8:
The Congress shall have the power
To coin money, regulate the value thereof, and of foreign coin, and fix the standard of
weights and measures;
To provide for the punishment of counterfeiting the securities and current coin of the
United States;...
To make all laws which shall be necessary and proper for carrying into execution the
foregoing powers, and all other powers vested  by this Constitution in the government of the United States, or in any department or officer thereof.

Article 1, Section 10:
No State shall...coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts....

 These passages in the Constitution made which of  the following statements true at that time?
a.  Only the states could make coins.
b.  Only the states could print paper money.
c.  The government could not print paper money.
d.  Only gold coins were acceptable money.

__D__  114.  A nonbank financial intermediary that primarily makes loans to construction companies for building homes is
a.  life insurance company.  c.  mutual fund.
b.  finance company.  d.  real estate investment trust.

__B__  115.  The par value of a bond is
a.  the stated interest on the debt.  c.  a rating of the quality of a bond.
b.  the total amount borrowed.  d.  its purchase price.

__D__ 116.  Junk bonds
a.  carry a low rate of return.  c.  are issued by municipalities.
b. are usually tax-exempt.  d. are exceptionally risky.

__A__  117.  The Efficient Market Hypothesis argues that
a.  stocks are always priced about right.  c.  all investments are the same.
b.  stocks are generally overpriced.  d.  every investment has some risk.

__D__  118.  Investors who sign a contract guaranteeing them the option of selling shares of stock at a specified price in the
future have agreed to a
a.  push option.  c.  call option.
b. spot option.  d. put option.

__A__  119.  The largest borrowers are
a.  governments and businesses.  c.  governments and households.
b.  households and businesses.  d.  insurance companies and households.

__A__ 120.  Bonds
a.  pay a fixed interest rate over a specified period of time.
b.  are insured by the federal government.
c.  are a consistently low-risk investment choice.
d.  are rated according to risk from A through G.

__D__  121.  Municipal bonds, or munis,
a.  pay higher interest rates than most bonds.
b.  are not usually tax-exempt.
c. are often risky investments.
d.  are usually a safe investment.

__B__  122.  Most stocks in the United States are traded on the
a.  New York Stock Exchange.  c.  American Stock Exchange.
b.  over-the-counter market.  d.  regional stock exchanges.

__B__  123.  A stock transaction that is made immediately at the market price is made in the
a.  futures market.  c.  futures options market.
b. spot market.  d. options market.

__B__ 124.  
Money is burning a hole in consumers’ pockets. Again last month, U.S. wage earners spent nearly as much as they made, contributing to record low savings. But consumers have good reason to be out there spending. They’ve got jobs, their incomes are rising, confidence is high, and the stock market is booming. This trend dragged down the savings rate—savings as a percentage of after-tax income—to a record low.

Source: The Columbus Dispatch, May 29, 1999.
 This passage suggests that the low savings rate is due to
a.  high unemployment.  c.  low prices.
b.  the booming economy.  d.  falling incomes.

__C__ 125.   According to the graph, when did the most significant bull market occur?
a. 1985-1990  c. 1995-2000
b. 1990-1995  d. after 2000

__B__ 126.   During what period on the graph did the S&P 500 rise above 300 and then dip below it?
a. 1980-1985  c. 1990-2000
b. 1985-1990  d. after 2000

__C__ 127.  
...75 years ago, ...three salesmen created the first mutual fund and opened up what was once an exclusive province of the affluent to just about everyone. When the Massachusetts Investors Trust made its debut in March 1924, it had $50,000 in assets and owned 45 stocks.... By pooling investments, the fund made shares in American companies accessible to a broader market... (the) true innovation was allowing investors to redeem shares upon request, at market value of the underlying stocks.

Source: U.S. News & World Report, April 5, 1999.
 According to the passage, when investors in the first mutual fund decided to sell their shares, how much money did they receive?
a.  the amount they originally paid
b.  the amount they originally paid, plus interest
c.  the amount other investors were paying for the same stocks the fund held
d.  the amount another investor agreed to pay them for their shares

__A__ 128.   Based on the illustration, you would earn more in any of the three retirement plans than you would on
basic savings because you would
a. pay yearly taxes on savings.
b.  invest more each year in the retirement plans.
c.  invest in the retirement plans for a longer time.
d.  receive a higher rate of return on the retirement plans.

__B__ 129.   Based on the illustration and on what you know abou t retirement plans, the 401(k) in this illustration
earned more than the traditional IRA or Roth IRA because
a.  the investor paid no annual tax on the 401(k).
b.  the company matched the employee’s contributions in the 401(k).
c.  all interest earned on the 401(k) was tax-free forever.
d.  the investor didn’t have to take the money out of the 401(k) until retirement.

__D__ 130.  
A Treasury bond refers to a Treasury security with a maturity greater than 10 years. The only difference between a Treasury bond and a Treasury note is the longer maturity of the bond. Coupon interest on a Treasury bond is paid semiannually.

Source: Standard & Poor’s.
 Based on the passage, which of the following statements is true?
a.  A Treasury bond matures in less than 10 years.
b.  A Treasury bond matures in less time than a Treasury note.
c.  Coupon interest on a Treasury note is paid twice a year.
d.  A Treasury note matures in 10 years or less.

__C__  131.  To determine Gross National Product,
a.  multiply all final goods and services by their prices.
b.  divide all final products and services by their prices.
c.  add to GDP all payments received by Americ ans outside the U.S. and subtract payments
made to foreign-owned resources in the U.S.
d.  add to GDP all payments made to foreign-owned resources in the U.S.and subtract
payments received by Americans outside the U.S.

__D__  132.  The census is taken every
a. two years.  c. eight years.
b. four years.  d. ten years.

__B__  133.  Baby boomers are those people born between
a.  1935 and 1945.  c.  1955 and 1965.
b.  1946 and 1964.  d.  1965 and 1975.

__A__  134.  Economic growth benefits the government by
a.  enlarging the tax base.
b. reducing budget surpluses.
c.  reducing the need for highway and defense spending.
d. justifying tax increases.

__D__  135.  The largest sector of the macroeconomy is the
a.  investment sector.  c.  foreign sector.
b. government sector.  d. consumer sector.

__A__  136.  An index of average level of prices for  all goods and services in the economy is the
a.  implicit GDP price deflator.  c.  producer price index.
b.  consumer price index.  d.  current GDP.

__C__  137.  Since the colonial period, the census has revealed
a.  a movement of population to rural areas.
b.  growth of extended family households.
c.  a trend toward smaller households.
d.  an increase in the number of children per family.

__D__  138.  The population center of the United States in 1990 was near
a. Baltimore, Maryland.  c. Lawrence, Kansas.
b. Evansville, Indiana.  d. Steelville, Missouri.

__D__  139.  The benefits of long-term economic growth include all of the following EXCEPT
a.  an increase in the standard of living.
b.  an increase in employment.
c.  a boost in economic growth of other nations.
d.  an increase in the availability of land.

Per Capita GDP
Luxembourg $33,609
United States  $33,586
Switzerland $27,126
Japan $23,311
Iceland $23,230

__A__ 140.   Economists use numbers such as those in the table as a measure of
a. standard of living.
b.  total dollar value of all final goods and services.
c. net exports.
d. national income.

__D__ 141.   The numbers in this table were calculated by
a.  adding the dollar value of all final goods and services produced in the nation.
b.  subtracting net exports from GDP.
c.  multiplying GDP by total population.
d.  dividing GDP by total population.

__B__ 142.  
GDP = C + I + G + F 
 In this model, the “F” represents the
a.  total of the dollar value of goods sent abroad and goods purchased from abroad.
b.  difference between the dollar value of goods sent abroad and goods purchased from
c.  total investments in the United States by foreign nationals.
d.  total investments in other nations by United States citizens.

__D__ 143.  

 A dip in real GDP per capita, such as the one shown for 1991 in the graph, could be caused by
a.  population decline during an economic expansion.
b.  population growth during an economic expansion.
c.  population decline during a recession.
d.  population growth during a recession.

__A__ 144.   This table keeps changes in real GDP from being overstated by adjusting for
a.  population growth.  c.  standard of living.
b. inflation.  d. productivity.

__A__  145.  The business cycle since World War II has been characterized by
a.  extended expansions alternating with brief recessions.
b.  brief expansions alternating with lengthy recessions.
c. uninterrupted expansion.
d. uninterrupted recession.

__C__  146.  Unemployment that is directly related to swings in the business cycle is
a.  frictional unemployment.  c.  cyclical unemployment.
b. structural unemployment.  d. seasonal unemployment.

__A__  147.  According to the cost-push theory, inflation is caused by
a. workers.  c. consumers.
b. government.  d. producers.

__A__  148.  The forty percent of the population with the lowest income controls
a.  less than 2 percent of the nation's wealth.
b.  about 10 percent of the nation's wealth.
c.  nearly 20 percent of the nation's wealth.
d.  about 40 percent of the nation's wealth.

__D__  149.  This is a proposed market-based antipoverty program designed to encourage work and reduce administrative
a.  Aid to Families with Dependent Children
b.  earned income tax credit
c. workfare programs
d.  negative income tax

__D__  150.  This marked the beginning of the Great Depression in 1929:
a.  end of World War I  c.  declaration of a “bank holiday”
b.  beginning of World War II  d.  stock market crash

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