Monday, September 26, 2011

Glencoe - Economics - Principles and Practices - Chapters 11 to 20 - Multiple Choice 2

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

__B__  151.  Changes in technology and changes in consumer tastes can cause
a.  frictional unemployment.  c.  cyclical unemployment.
b. structural unemployment.  d. seasonal unemployment.

__D__  152.  According to the demand-pull theory, inflation is caused by
a. workers.  c. producers.
b. government.  d. consumers.

__D__  153.  The Lorenz curve is used to demonstrate
a.  consumer demand and spending.  c.  the severity of inflation.
b.  the severity of a recession.  d.  the degree of income inequality.

__C__  154.  All of the following account for the growing income gap EXCEPT
a. a decline in unions.
b.  a shift in employment from the manufacturing to the service industry.
c.  lessening wage advantages for the well educated.
d.  a shift from married-couple families to single-parent families.

__D__ 155.  
A key gauge of future U.S. economic activity declined 0.5% last month, as the Sept. 11
terrorist attacks in New York and Washington weakened an already troubled economy.

The Conference Board said Monday its index of leading economic indicators fell to 109.2 in September,...the largest one-month decline since January 1996.... The index indicates where the overall U.S. economy is headed in the next three to six months....

The economy had been struggling for several months before the Sept. 11 attacks. Many
economists have said they believe that a recession is unavoidable with the new uncertainties raised by the disaster.

Source: “Leading Indicators Decline,”,  October 22, 2001.
 The passage discusses a business fluctuation influenced by
a. capital expenditures.  c. innovation.
b. monetary factors.  d. external shock.

__C__ 156.  

 The Roaring Twenties in the graph can be characterized as a period of economic
a. contraction.  c. expansion.
b. recession.  d. trough.

__B__ 157.  

 What type of unemployment does the cartoon depict?
a. cyclical  c. seasonal
b. technological  d. frictional

__C__ 158.  
Is the number of available but jobless workers in the United States shrinking to the point that employers may be forced to grant inflationary wage increases to attract new employees or keep the ones they have?

“Should labor markets continue to tighten, significant increases in wages, in excess of
productivity growth, will inevitably emerge, absent the unlikely repeal of the law of supply and demand,” [Federal Reserve Chairman Alan] Greenspan told Congress.

Source: “Shrinking Labor Pool Raises Fear of Wage Pressures and Higher Prices,” The Washington Post, June 25, 1999.
 This passage is describing a(an)
a.  job shortage.  c.  worker shortage.
b.  decrease in productivity.  d.  increase in unemployment.

__B__ 159.  
For all the recent talk of cutting taxes, Congress rarely cuts them when the economy is
growing robustly, as it is now, and unemployment is low. The worry among economists is that the extra money in people’s pockets may make an already strong economy too strong, finally stoking inflation after a long period of relatively stable prices.

Source: The New York Times,  July 14, 1999.
 The passage describes rising inflation as a possible result of
a.  tax cuts.  c.  rising unemployment.
b.  a booming economy.  d.  a prolonged period of stable prices.

__A__ 160.  The Federal Reserve
a.  is made up of 12 district banks and 25 branch banks.
b.  is made up of district banks that operate independently from one another.
c.  is managed by a 12-member board of directors.
d.  was established in 1930s.

__B__ 161.  Liabilities are
a.  reserves a bank must set aside.  c.  cash a bank can use for making loans.
b.  debts and obligations.  d.  the same as net worth.

__A__  162.  A balance sheet shows all of the following EXCEPT
a.  bank assets on the right of the T account.
b. net worth.
c. legal reserves.
d. deposits and loans.

__A__  163.  In the short run, an increase in the money supply results in
a.  lower interest rates.  c.  economic expansion.
b.  higher interest rates.  d.  increased consumer spending.

__D__  164.  Unlike many politicians, the Fed
a.  must respond to pressure from the public.
b.  recognizes high interest rates as a sign of an unhealthy economy.
c.  is concerned about short-term interest rates.
d.  is concerned about the long-run health of the economy.

__D__  165.  The Fed's Federal Open Market Committee
a.  advises the Fed on the overall health of the economy.
b.  regulates savings and loan associations, savings banks, and credit unions.
c.  advises the Fed on consumer credit laws.
d.  is the Fed's primary monetary policymaking body.

__A__ 166.  Assets are
a.  properties, possessions, and claims on others.
b.  cash a bank owes to depositors.
c.  the same as net worth.
d. legal reserves.

__B__  167.  For a bank to be profitable, how much of a spread must it maintain between the rate it charges on loans and the rate it pays for borrowed funds?
a.  1 percent  c.  5–6 percent
b. 2–3 percent  d. 8–9 percent

__A__  168.  To monetize the debt incurred by deficit spending during the Vietnam War, the money supply was
a.  increased to keep interest rates stable.
b.  decreased to keep interest rates stable.
c.  increased to increase interest rates.
d.  decreased to decrease interest rates.

__C__  169.  When the Fed refers to M1, it is referring to such elements of the money supply as
a.  money market funds.  c.  traveler's checks and currency.
b. savings deposits.  d. stocks.

__B__ 170.  
Like a driver applying a quick tap of the brakes, the Federal Reserve yesterday raised the cost of borrowing to keep the U.S. economy from running ahead too fast. As a result, consumers can expect to pay a little more when buying homes, cars, and other big-ticket items, as well as when carrying credit-card balances.

Source: The Columbus Dispatch, July 1, 1999.
 Why will the Fed’s action in the passage cause the result described?
a.  Sellers of expensive items will raise their prices.
b.  Banks will raise their loan interest rates.
c.  Inflation will increase.
d.  Banks will have to meet a higher reserve requirement.

__C__ 171.  
...[Federal Reserve] Chairman Alan Greenspan decided seven years ago to publicize the
central bank’s interest-rate moves once they were made. Now, each meeting of the Fed—
whether the central bank changes rates or not—triggers a chorus of instant analysis of what it means for the economy and the financial markets.

Source: Business Week, July 23, 2001.
 Which function of the Federal Reserve is the subject of this passage?
a.  serving as the federal government’s banker
b.  holding and settling reserve requirements
c.  regulating the money supply
d.  supplying paper currency

Federal Reserve Easy Money Policy

__B__  172.  Which of the following results should be included where the question mark appears in the illustration?
a.  unemployment  c.  the reserve requirement
b. inflation  d. interest rates

__A__ 173.  
Federal Reserve Tight Money Policy

 Which of the following results should be included where the question mark appears in the illustration?
a. unemployment  c. consumer spending
b. inflation  d. production

__B__ 174.  

 This cartoon illustrates that when the Federal Reserve raises interest rates, banks
a.  lend more money to their customers.
b.  increase interest rates to their borrowers. 
c.  impose late payment penalties on their customers.
d.  compound interest on their savings accounts.

__C__ 175.  
Federal Reserve policymakers cut their short-term interest rate target an aggressive half-point to 2% Tuesday.... This cut was the Fed’s 10th a ttempt this year to shore up the U.S. economy, which is still weakening after the Sept. 11 attacks. The moves represent some of the most furious rate-cutting in Fed history.... Fed officials have now pushed the rate banks charge each other for overnight loans to its lowest level since 1961....

Major banks lowered the prime rate in [lockstep] with the Fed, bringing it down to 5% from 5.5%. That translates into lower rates for home-equity loans, business loans, and some credit cards.

Source: “Fed Slashes Interest Rates,” ISA Today,  November 7, 2001.
 In taking the actions described in the passage, the Fed was trying to
a.  increase the amount banks keep on reserve.
b.  decrease the money supply.
c. increase business activity.
d. decrease business activity.

__C__ 176.  

 Suppose supply curve SS on the graph represents the money supply. Which of the following Federal
Reserve actions could cause curve SS to move to S1S1?
a.  lowering the reserve requirement
b.  buying bonds in open market operations
c.  increasing the discount rate
d.  printing more currency

__D__ 177.  
Not too many years ago, Federal Reserve officials conducted monetary policy as if they were members of the Politburo plotting behind the thick walls of the Kremlin.

Source: Business Week, January 11, 1999.
 Based on this quotation, the author believed that the Federal Reserve had been too
a. dictatorial.  c. sinister.
b. powerful.  d. secretive.

__D__ 178.  

 In the cartoon, the comments by Federal Reserve Board Chairman Alan Greenspan probably
a.  predicted an economic upturn ahead.
b.  encouraged stock market investment.
c.  predicted strong growth in pharmaceuticals.
d.  dampened investor enthusiasm about the economic outlook.

__A__  179.  A comprehensive measure of consumer discomfort during a period of rising inflation and high unemployment is the
a. misery index.  c. Laffer curve.
b.  aggregate supply curve.  d.  aggregate supply curve.

__D__  180.  Aggregate demand will increase
a.  if the dollar declines in value.
b.  when productivity is low.
c.  if consumers save more and spend less.
d.  if consumers save less and spend more.

__B__  181.  According to John Maynard Keynes's theory of the multiplier-accelerator effect, a decline in investment
spending will
a.  lead to an upward spiral of the economy.
b.  lead to a downward spiral of the economy.
c.  be offset by an increase in consumer demand.
d.  lead to lower consumer prices.

__A__  182.  Unlike demand-side economics, supply-side economics
a.  advocates reduced government involvement in business.
b.  advocates increased government involvement in business.
c. emphasizes increasing consumer purchasing power.
d.  urges higher taxes to increase spending on government programs.

__A__  183.  The nation's monetary policy
a.  often comes under attack from politicians.
b.  almost always complements presidential and Congressional aims.
c.  is determined by the Council of Economic Advisers.
d.  is tightly managed by Congress.

__A__  184.  Some people believe that a weak economy will result in
a.  a higher crime rate.  c.  higher taxes.
b.  increased production.  d.  expansion of municipal services.

__D__  185.  Decreases in aggregate supply can be caused by
a.  decreases in fuel and transportation costs.
b.  reduced government regulation.
c. lower taxes.
d.  tightening of immigration laws.

__D__ 186.  John Maynard Keynes
a.  argued that foreign-sector spending should not be ignored.
b.  argued that government should limit its involvement in business.
c.  introduced his theories in the 1970s.
d.  introduced his theories in 1936.

__C__  187.  The Council of Economic Advisers
a.  is an independent agency with broad regulatory powers.
b.  determines the Fed's monetary policy.
c.  advises the president on economic developments and strategy.
d.  advises Congress on economic developments and strategy.

__D__ 188.  
It will take a few years for the global economy to achieve a new equilibrium between
manufacturing production and consumer demand. Many goods are now in oversupply, and consumer demand is impaired by falling currencies and growth-inhibiting governmental policies.... But these are cyclical imbalances of the sort that have occurred for decades and will keep recurring from time to time.

Source: Kiplinger’s Personal Finance Magazine, November 1998.
 This passage is describing a
a.  shift in aggregate demand.  c.  shortage.
b.  shift in aggregate supply.  d.  surplus.

__B__ 189.  

 Based on the graph, the increase in oil prices caused output to
a.  rise from Q2  to Q0.  c. rise from Q0  to Q1.
 b. fall from Q0  to Q2.  d. fall from Q1  to Q0.

__B__ 190.   Which of the following events could cause aggregate supply curve AS1  to shift to AS0?
a.  higher labor productivity  c.  lower prices for foreign oil
b.  higher interest rates  d.  lower taxes

__A__ 191.   Which of the following events could cause aggregate supply curve AS0  to shift to AS1?
a.  a tax cut  c.  an increase in the price for foreign oil
b.  a rise in interest rates  d.  a decrease in the price level

__D__ 192.  

 Which of the following situations could cause aggregate demand curve AD1  to shift to AD0?
a. higher transfer payments
b.  a forecast of better economic conditions ahead
c.  a decrease in the personal income tax rate
d.  an increase in consumer saving

__B__ 193.  
Have monetary policymakers got [inflation] licked?

Central bankers will tell you that they have not, and not just out of modesty. Although plenty of them have targets for inflation, none is sure precisely how, or how rapidly, changes in monetary policy affect the economy. So they cannot be certain that a sensible-looking interest-rate cut will not revive inflation—or that a cautious-looking rise will not tip the economy into a recession.

Hence the search for...a simple rule for choosing [a] monetary policy that keeps inflation
down without hitting the economy too hard.

Source: The Economist, August 10, 1996.

 In the passage, central bankers are wrestling with what tradeoff?
a.  monetary versus fiscal policy
b.  inflation versus economic growth
c.  interest-rate cut versus recession
d.  supply-side versus demand-side policies

__B__ 194.   Suppose policymakers target a goal of continuous, stable economic growth without inflation. Where on
the diagram does this goal belong?
a. W  c. Y
b. X  d. Z

__D__ 195.   Suppose policymakers decide to increase federal spending to put more money in people’s hands. Where
on the diagram does this policy action belong?
a. W  c. Y
b. X  d. Z

__B__ 196.   Suppose policymakers decide to cut taxes. Where on the diagram does this policy action belong?
a. W  c. Y
b. X  d. Z

__A__  197.  Tariffs and quotas can have all of the following effects EXCEPT
a. promoting third-world development.
b.  increasing prices consumers pay for goods.
c. protecting domestic industry.
d. reducing trade deficits.

__C__  198.  Revenue tariffs are levied to
a.  increase imports.  c.  raise money.
b. lower exports.  d. protect domestic producers.

__B__  199.  The Smoot-Hawley Tariff of 1930 resulted in
a.  the lowest tariff rates in U.S. history.
b.  the highest tariff rates in U.S. history.
c.  rapid growth of international trade.
d.  significant growth of domestic industry.

__B__  200.  The international agency that administers trade agreements and settles trade disputes is
a. GATT.  c. NAFTA.
b. WTO.  d. the United Nations.

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

Monday, September 12, 2011

Glencoe - Economics - Principles and Practices - Chapters 11 to 20 - 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

__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

__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

__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

__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

__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. 

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

__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
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

__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

__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.

Monday, September 5, 2011

Welcome To Mr. Johnson's Learning Emporium!

Since we seem to keep running out of time in class, I've finally decided to join in on all the online education hype. I'll post extra questions here for you to think about them. I'll warn you, they can be tough because some of them won't even be from our class! Also, relax, this isn't for credit.

I'll be posting different types of questions: short answer, multiple choice, and true/false. If you have a hard time finding the answer, stop worrying; the answers will be posted right below it (no peeking, though! remember this is not for credit, this is to study). If you want to discuss questions further, you can either post your response as a comment or write it down on paper and bring it to me in class. If you think my answer is wrong, let me know in the comments for that question.