Test 3 Econ

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1.  Suppose government expenditures = $1,400, taxes are a flat 18 percent of GDP, GDP = $6,200, and full-employment GDP = $7,000. What is the structural deficit?
A.
B.
C.
D.
2.  The deficit that exists when the economy operates at full employment is called the __________ deficit.
A.
B.
C.
D.
3.     88.   The __________ rate is the interest rate one bank pays another bank for a loan.
A.
B.
C.
D.
E.
4.     27.   The first bankers were
A.
B.
C.
D.
E.
5.  Senator Smith proposes that the income tax structure be revised to have two tax rates. The first, 16 percent, applies to persons whose income is between $0 and $40,000 a year. The second, 23 percent, applies to persons whose income is more than $40,000 a year. This is a
A.
B.
C.
D.
6.  The lag between an increase in government spending and the impact of this increased spending on the economy is called the __________ lag.
A.
B.
C.
D.
7.  Suppose Congress decreases income taxes. This is an example of
A.
B.
C.
D.
8.  Fiscal policy may not work as policymakers intend it to work because of
A.
B.
C.
D.
E.
9.  Federal Reserve Action Effect on the Money Supply Raise the required reserve ratio (1) Raise the discount rate (2) Lower the required reserve ratio (3) Conduct open market sale (4) Lower the discount rate (5) Conduct open market purchase (6) 120.   Refer to Exhibit 13-2.  What word (up or down) should go in the place of blank (5) and blank (6), respectively?
A.
B.
C.
D.
10.  Taxable Income Taxes $0 - $23,000 9% of taxable income $23,001 - $42,000 $2,070 + 13% of everything over $23,000 $42,001 - $69,000 $4,540 + 17% of everything over $42,000 Refer to Exhibit 11-4.  If a person’s taxable income is $30,000, how much does he pay in taxes?
A.
B.
C.
D.
11.     41.   Bank A has deposits of $8,000 and total reserves of $2,000. If the required reserve ratio is 0.15, the bank has required reserves of
A.
B.
C.
D.
12.  Suppose that government expenditures are currently $700 billion and tax revenues are currently $550 billion.  Assume further that the government estimates that if the economy were operating at full employment government expenditures would only be $685 billion and tax revenues would be $600 billion.  In this case, the structural deficit is _____________ billion.
A.
B.
C.
D.
13.     14.   Money evolved out of the self-interested actions of
A.
B.
C.
D.
14.  122.   Which of the following is not a monetary policy tool of the Fed?
A.
B.
C.
D.
E.
15.     17.   Your neighbor has knowledge of economics and you would like her to share it with you. You own a car, a CD player and a new pair of running shoes. You wish to make a trade, but the neighbor does not want what you have. The problem can be stated as follows: You are not satisfying the
A.
B.
C.
D.
16.  A curve showing the relationship between tax rates and tax revenues is called a __________ curve.
A.
B.
C.
D.
17.  Money's basic advantage as compared to barter is that
A.
B.
C.
D.
18.  Suppose that government expenditures are currently $700 billion and tax revenues are currently $550 billion.  Assume further that the government estimates that if the economy were operating at full employment government expenditures would only be $685 billion and tax revenues would be $600 billion.  In this case, the total budget deficit is _____________ billion.
A.
B.
C.
D.
19.     51.   Some of the crowding out of private expenditures may come in the form of
A.
B.
C.
D.
20.     50.   The crowding-out effect suggests that
A.
B.
C.
D.
21.       6.   Which of the following is not a major responsibility of the Fed?
A.
B.
C.
D.
E.
22.  Suppose government expenditures = $1,400, taxes are a flat 18 percent of GDP, GDP = $6,200, and full-employment GDP = $7,000. What is the budget deficit?
A.
B.
C.
D.
23.  The AD curve shifts to the right with a __________ in government purchases (G) or a __________ in taxes.
A.
B.
C.
D.
24.  The top 1% of income earners in the U.S. (those with the highest taxable incomes) pay
A.
B.
C.
D.
E.
25.  If there is complete crowding out, the effective value of the multiplier is
A.
B.
C.
D.
26.     28.   Because money __________________, people are _________________ likely to specialize their work in a money economy.
A.
B.
C.
D.
27.  110.   The Fed is intended to be controlled by
A.
B.
C.
D.
28.  109.   If the Fed purchases government securities from Bank A, __________ in the banking system __________ and the money supply __________.
A.
B.
C.
D.
E.
29.  If an economy has a structural surplus and a cyclical deficit, it may be concluded that
A.
B.
C.
D.
30.     23.   In a barter economy, people are _________ to specialize in the production of one good or service, compared to in a money economy.
A.
B.
C.
D.
31.     86.   If reserves rise by $1 million, what is the dollar difference between the maximum change in checkable deposits when the required reserve ratio is 10 percent and when it is 15 percent?
A.
B.
C.
D.
32.  Suppose government expenditures = $1,400, taxes are a flat 18 percent of GDP, GDP = $6,200, and full-employment GDP = $7,000. What is the cyclical deficit?
A.
B.
C.
D.
33.     22.   A savings deposit is a type of
A.
B.
C.
D.
E.
34.     50.   The unit of account function of money refers to the
A.
B.
C.
D.
35.  If peanuts were widely accepted for purposes of exchange, then
A.
B.
C.
D.
E.
36.     30.   According to the text, in the book version of The Wonderful Wizard of Oz, Dorothy's slippers are
A.
B.
C.
D.
37.  Refer to Exhibit 11-1. The economy is currently at point 1. Suppose the federal government increases purchases and there is complete crowding out. As a result, the aggregate demand (AD) curve in the exhibit
A.
B.
C.
D.
38.  Which of the following is an example of crowding out?
A.
B.
C.
D.
39.       1.   The Federal Reserve System is the
A.
B.
C.
D.
40.  That part of the deficit due to output being below Natural Real GDP is called the __________ deficit.
A.
B.
C.
D.
41.  A federal budget surplus
A.
B.
C.
D.
E.
42.  The U.S. income tax is currently a __________ tax.
A.
B.
C.
D.
43.   Which of the following illustrates a barter transaction?
A.
B.
C.
D.
E.
44.     76.   Consider the following data: currency (held outside banks) = $354 billion, checkable deposits = $250 billion, traveler's checks = $4 billion, small-denomination time deposits = $200 billion, savings deposits = $100 billion, retail money market mutual funds = $160 billion. M1 equals __________ billion and M2 equals __________ billion.
A.
B.
C.
D.
E.
45.     95.   The most important responsibility of the Fed is to
A.
B.
C.
D.
46.  Federal Reserve Action Effect on the Money Supply Raise the required reserve ratio (1) Raise the discount rate (2) Lower the required reserve ratio (3) Conduct open market sale (4) Lower the discount rate (5) Conduct open market purchase (6) Refer to Exhibit 13-2.  What word (up or down) should go in the place of blank (3) and blank (4), respectively?
A.
B.
C.
D.
47.     31.   In the history of banking, warehouse receipts refer to receipts
A.
B.
C.
D.
48.  Suppose aggregate demand is too high to bring about the Natural Real GDP level. A Keynesian policy prescription would call for a(n) _____________________ to close this inflationary gap.
A.
B.
C.
D.
E.
49.  Expansionary fiscal policy actions include __________ government spending and/or __________ taxes, while contractionary fiscal policy actions include __________ government spending and/or __________ taxes.
A.
B.
C.
D.
E.
50.     51.   The store of value function of money refers to the ability of money to
A.
B.
C.
D.
51.     24.   M2 is comprised of
A.
B.
C.
D.
52.     89.   An open market __________ by the Fed increases the money supply; a(n) __________ in the required reserve ratio increases the money supply.
A.
B.
C.
D.
53.  A "flat tax" is another term for __________ tax.
A.
B.
C.
D.
54.     96.   If excess reserves are $10 million, (total) reserves are $14 million, and the required reserve ratio is 10%, then required reserves equal ________________ and checkable deposits equal ____________________.
A.
B.
C.
D.
55.  Suppose the government increases spending on public education by $700 million and individual spending on private education drops by $700 million. This is an example of
A.
B.
C.
D.
E.
56.     33.   Total bank reserves equal
A.
B.
C.
D.
57.  112.   The president of the Federal Reserve Bank of ________________ holds a permanent seat on the _________________________.
A.
B.
C.
D.
E.
58.     45.   When a bank makes a loan to one of its customers, to the bank the loan is classified as
A.
B.
C.
D.
59.     34.   Required reserves are the amount of
A.
B.
C.
D.
60.     43.   A bank has $10 million in checkable deposits and $2.5 million in reserves. If the required reserve ratio is 10 percent, then the bank has
A.
B.
C.
D.
E.
61.     47.   Which of the following is true?
A.
B.
C.
D.
E.
62.  121.   In the United States, paper currency is printed at the
A.
B.
C.
D.
63.  Taxable Income Taxes $0 - $23,000 9% of taxable income $23,001 - $42,000 $2,070 + 13% of everything over $23,000 $42,001 - $69,000 $4,540 + 17% of everything over $42,000 Use the information provided in Exhibit 11-4.  What is the marginal tax rate on the 23,000th dollar earned?
A.
B.
C.
D.
64.     46.   A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent. This means the bank could have __________ in checkable deposit liabilities and __________ in reserves.
A.
B.
C.
D.
65.  If the structural deficit is $330 billion and the cyclical deficit is $80 billion, it follows that the __________ is __________ billion.
A.
B.
C.
D.
E.
66.     94.   The president of the ________________________ holds a permanent seat on the FOMC.
A.
B.
C.
D.
E.
67.     56.   Money is defined by economists as
A.
B.
C.
D.
E.
68.     32.   Fractional reserve banking is a term used to describe a banking system whereby
A.
B.
C.
D.
E.
69.  If an individual pays an additional $0.30 in taxes as a result of a $1.00 increase in income, that individual has a(n) __________ tax rate of 30 percent.
A.
B.
C.
D.
70.       3.   The Board of Governors of the Federal Reserve is comprised of
A.
B.
C.
D.
E.
71.  A unit of account is
A.
B.
C.
D.
E.
72.     52.   M2 includes M1 plus all of the following except
A.
B.
C.
D.
73.     87.   Which of the following will lower the money supply?
A.
B.
C.
D.
E.
74.  Which of the following is a correct listing of money's functions?
A.
B.
C.
D.
E.
75.  A federal budget deficit
A.
B.
C.
D.
E.
76.  Refer to Exhibit 11-2. At point A, if we cut tax rates slightly, tax revenues
A.
B.
C.
D.
77.  110.   A taxpayer pays __________ tax rate on additional income if the income tax structure is progressive, __________ tax rate on additional income if the income tax structure is proportional, and __________ tax rate on additional income if the income tax structure is regressive.
A.
B.
C.
D.
E.
78.       8.   __________ flows from government to households.
A.
B.
C.
D.
79.  Elaine's taxable income increases by $1 and her tax payment increases by $0.28. Her marginal tax rate is
A.
B.
C.
D.
80.  Taxable Income Taxes $0 - $23,000 9% of taxable income $23,001 - $42,000 $2,070 + 13% of everything over $23,000 $42,001 - $69,000 $4,540 + 17% of everything over $42,000 Refer to Exhibit 11-4.  If a person’s taxable income is $50,000, how much does he pay in taxes?
A.
B.
C.
D.
81.     37.   Ninth National Bank holds $150,000,000 in checkable deposits and $12,000,000 in total reserves. With a required reserve ratio of 8 percent, how much in excess reserves is Ninth National holding?
A.
B.
C.
D.
E.
82.  Barter is
A.
B.
C.
D.
83.     39.   The amount of required reserves a bank holds depends on the
A.
B.
C.
D.
84.     97.   Here is how an open market sale works: A commercial bank __________ government securities to (from) the Fed, which lowers the bank's deposits at the __________ and __________ the bank's __________.
A.
B.
C.
D.
E.
85.  Suppose the government increases spending on public education by $700 million and individual spending on private education drops by $700 million. This is an example of
A.
B.
C.
D.
E.
86.     97.   Which piece of evidence is consistent with zero crowding out?
A.
B.
C.
D.
E.