Aggregate demand differs from regular demand in that aggregate demand

1
Aggregate demand differs from regular demand in
that aggregate demand

1. Measures demand for the entire economy, rather
   than one market
2. Is only used when trying to measure money markets
3. Includes supply as well as demand
4. Is inelastic while regular demand is elastic

2
If the U.S. economy was in a recession, which
fiscal policy would be most appropriate to get
out of the recession?

1. Decrease government spending, the citizens will
   have more money to spend
2. Decrease taxes, people have more disposable
   income
3. Raise the reserve requirement, banks will have
   more money to loan
4. Buy bonds on the open market, the money supply
   will increase

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4
When the Fed is conducting open market
operations, they are

1. Buying or selling government bonds
2. Buying or selling stocks on the New York Stock
   Exchange
3. Buying or selling factors in the factor market
4. Buying or selling goods in the product market

5
When the Federal Reserve buys securities on the
open market, they are hoping to

1. Encourage people to save more money.
2. Expand the money supply and increase GDP.
3. Reduce the amount of money banks are required to
   hold the reserves.
4. Shrink the money supply and discourage inflation.

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7
Unemployment that occurs as a result of a
recession or an economic downturn is

1. Frictional
2. Seasonal
3. Structural
4. Cyclical

8
Which is NOT something governments typically do
in market economies?

1. Resolve market failures
2. Protect rights
3. Set prices
4. Provide public goods

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10
The total amount of goods and services produced
throughout the economy is

1. Aggregate supply
2. Quantity supplied
3. Supply shock
4. Aggregate demand

11
A person trying to find the unemployment rate in
a country needs which two pieces of information?

1. The total number of jobs and the number of people
   without jobs
2. The number of unemployed people and the number of
   discouraged workers
3. The number of unemployed people and the
   population
4. The number of unemployed people and the number in
   the labor force

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13
The unemployment rate, GDP, and CPI can be used
to determine

1. The supply and demand of a market
2. Which stage of the business cycle and economy is
   on
3. If a country uses a market or command economy
4. How likely a person is to get credit

14
In country A, everyone pays a 10 income tax.
This type of tax system is known as

1. Sales
2. Progressive
3. Regressive
4. Proportional

15
If an economy experiences the following 12
inflation (very high), 2.5 unemployment (very
low), and high investment, they are MOST LIKELY
on which part of the business cycle?

1. Recession
2. Contraction
3. Expansion
4. Trough

16
Adding everything the U.S. Government owes
calculates the

1. National deficit
2. Unemployment rate
3. National debt
4. Balance of payments

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18
Assume the U.S. Governments most recent fiscal
policy slowly caused the economy to speed up and
enter an expansion. Most likely, the government

1. Increased taxes
2. Increased the reserve requirement
3. Decreased the discount rate
4. Decreased taxes

19
You hear on the radio that the Fed is lowering
the discount rate and buying a large number of
treasury bonds. Based on this information, which
part of the business cycle does the Fed most
likely believe the economy is in?

1. Expansion
2. Peak
3. Contraction
4. Unemployment

20
National deficits are different than the national
debt because

1. Deficits occur when expenditures exceed revenues
   for 1 fiscal year
2. Only deficits vary from year to year
3. Deficits are calculated using all previous
   deficits
4. Debts are consistently repaid and deficits cannot
   be

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22
By comparing the real GDP of two time periods a
person can measure the

1. Consumer price index
2. Inflation rate
3. Economic growth rate
4. Unemployment rate

23
Assume an economy is having high unemployment and
low GDP. Which fiscal policy would be most
appropriate to correct this situation?

1. Increase the discount rate
2. Decrease government spending
3. Decrease taxes
4. Increase the reserve requirement

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25
If the CPI for the last three months has been
100, 101, 104, then what DEFINITE conclusion can
you make about the economy?

1. The production possibilities curve has shifted
2. Prices have increased
3. GDP is improving
4. Unemployment has decreased

26
Comparing real GDP between two consecutive years
is MOST useful in determining which economic
measurement?

1. Equity
2. Exchange rates
3. Equilibrium price
4. Economic growth

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28
An economy that is at full employment

1. Has close to zero cyclical unemployment
2. Has found a job for everyone
3. Has close to zero frictional and structural
   unemployment
4. Has only seasonal unemployment

29
A market basket represents a long list of goods
and services that the average household buys in a
given time period. By dividing a market basket of
goods and services from one time period by a
market basket from another time period a person
can calculate the

1. Gross domestic product
2. Consumer price index
3. Unemployment rate
4. Aggregate supply

30
Which person would be hurt the MOST by sudden
inflation?

1. Sally, who has a fixed payment on a mortgage
2. Jim, who works at a company that gives raises
   every year
3. Pedro, who receives income from the stock
   portfolio
4. Marie, who is retired and lives on a fixed income

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32
A market basket is generally used for

1. Comparing prices of standard goods between years
   to determine inflation
2. Putting things in while you walk around the store
3. Advertising new products for companies
4. Determining how much GDP is produced every year

33
If an economy is in a trough on the business cycle

1. Unemployment is high, real GDP growth is low, and
   inflation is low
2. Unemployment is low, real GDP growth is high, and
   inflation is high
3. Unemployment is low, real GDP growth is low, and
   inflation is low
4. Unemployment is high, real GDP growth is high,
   and inflation is low

34
Unemployment characterized by large numbers of
workers who have recently been replaced by
machines or laid-off due to technological
improvements is considered to be which kind of
unemployment?

1. Cyclical
2. Frictional
3. Structural
4. Seasonal

35
Gross Domestic Product is a method for
calculating how much a country produces by adding
which four spending categories?

1. Consumption, Interest Rates, Government, Net
   Exports
2. Consumption, Investment, Government, Business
   expenditures
3. Consumption, Investment, Government, Net Exports
4. Wages, Rent, Interest, Dividends

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37
Which is used to measure economic growth?

1. Real GDP
2. Interest rates
3. Inflation
4. Unemployment

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39
In the United States economy, the role of money
is to

1. Create jobs in the factor market
2. Control inflation
3. Set prices on goods and services
4. Facilitate exchange between buyers and sellers

40
Which set of information would indicate that an
economy is on the recovery phase of the business
cycle?

1. Low inflation, increasing unemployment,
   decreasing GDP
2. Increasing inflation, decreasing unemployment,
   increasing GDP
3. Increasing inflation, increasing unemployment,
   increasing GDP
4. Decreasing inflation, increasing unemployment,
   decreasing GDP

41
When calculating GDP, the purchase of a new
factory is counted as

1. Net exports
2. Investment
3. Government
4. Consumption

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43
The consumer price index is used primarily to
measure the

1. Economic growth of a country
2. Unemployment rate
3. Production possibilities curve
4. Inflation rate

44
Sharlee was recently laid off from her job at a
manufacturing plant when the company she worked
for brought in a machine to replace her. This is
classified as what type of unemployment?

1. Seasonal
2. Cyclical
3. Structural
4. Frictional

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46
Which BEST describes GDP?

1. GDP is used to determine the inventories of
   business around the US.
2. GDP measures the market value of all goods and
   services economy in a given time period.
3. It is the data used to determine how many people
   are employed.

47
What is MOST LIKELY to happen to the economy if
the Federal Reserve Bank increases the discount
rate at the same time that Congress passes a law
reducing government spending?

1. Contraction, because both of the policies are
   contractionary.
2. Expansion, because both of the policies are
   expansionary.
3. Nothing, because the policies cancel each other.
4. Nothing, because one is a fiscal policy and the
   other is a monetary policy.

48
If the Fed buys treasury securities on the open
market at the same time that the government
drastically increases spending, then

1. It is obvious both institutions thought the
   economy was on a peak.
2. The business cycle will invert.
3. The policies will cancel each other and there
   will be no change in the economy.
4. Aggregate demand is likely to increase causing
   inflation.

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50
Monetary Policy is defined as

1. Decisions of the Federal Reserve System that
   determine the monetary supply
2. Buying and selling of currency in foreign
   exchange markets
3. Interaction of buyers and sellers in the market
   place
4. Taxing and spending decisions of the United
   States Government

51
Assume the Fed has recently made large sales on
the open market and Congress has passed
legislation that includes large tax increases. If
this is true then apparently economic leaders
believe

1. A drastic deficit in the balance of trade exists
2. The economy is performing on the production
   possibilities curve
3. Hyperinflation and overproduction is occurring

52
The economy is in the trough of the business
cycle. A budget surplus means that

1. The government has spent more money than the Fed.
2. The Fed has spent more money than the government.
3. The government has taken in more money than it
   spent.
4. The government has spent more money than it took
   in.

53
If the economy was in a recession and the Federal
Reserve Bank and Congress BOTH wanted to correct
it quickly, which policy combination would be
best?

1. Increase government spending, sell bonds
2. Raise taxes, sell bonds
3. Cut taxes, buy bonds
4. Cut taxes, sell bonds

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