Test 3 Econ

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Test 3 Econ

  
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1.  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.
2.     26.   A savings account functions as
A.
B.
C.
D.
3.     96.   Here is how an open market purchase works: The Fed __________ government securities to (from) a commercial bank, which raises the bank's deposits at the __________ and increases the bank's __________.
A.
B.
C.
D.
E.
4.     21.   A "money market deposit account" is a(n)
A.
B.
C.
D.
E.
5.     16.   The requirement of a "double coincidence of wants" is the chief __________ of the __________ exchange system.
A.
B.
C.
D.
6. 
Refer to Exhibit 11-2. At point B, if we cut tax rates slightly, tax revenues
A.
B.
C.
D.
7.     72.   Which of the following Fed actions will decrease the money supply?
A.
B.
C.
D.
E.
8.     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.
9.  Suppose the government attempts to stimulate the economy by increasing purchases without increasing taxes. Which of the following statements is most likely to be accepted by someone who believes in crowding out?
A.
B.
C.
D.
10.  The period that elapses between the passage of legislation reducing taxes and the time the tax cut is put into effect is called the __________ lag.
A.
B.
C.
D.
11.  The top 1% of income earners in the U.S. (those with the highest taxable incomes) pay
A.
B.
C.
D.
E.
12.  A federal budget deficit
A.
B.
C.
D.
E.
13.     29.   Accordidng to the text, The Wonderful Wizard of Oz is alleged to be a story about
A.
B.
C.
D.
14.     51.   The store of value function of money refers to the ability of money to
A.
B.
C.
D.
15.  If there is complete crowding out, the effective value of the multiplier is
A.
B.
C.
D.
16.   Which of the following illustrates a barter transaction?
A.
B.
C.
D.
E.
17.  A curve showing the relationship between tax rates and tax revenues is called a __________ curve.
A.
B.
C.
D.
18.  The period that elapses between the passage of legislation reducing taxes and the time the tax cut is put into effect is called the __________ lag.
A.
B.
C.
D.
19. 
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.
20.  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.
21. 
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.
22.     99.   The potential buyer of a house has less information about the house than the seller of the house. This is a case of
A.
B.
C.
D.
E.
23.     72.   Which of the following Fed actions will decrease the money supply?
A.
B.
C.
D.
E.
24.     19.   Historically, which of the following goods have evolved into money?
A.
B.
C.
D.
E.
25.  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.
26.  The AD curve shifts to the left with a __________ in government purchases (G) or a __________ in taxes.
A.
B.
C.
D.
27.  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.
28.     27.   The first bankers were
A.
B.
C.
D.
E.
29. 
Refer to Exhibit 11-2. Compare points A and B. Which of the following is true?
A.
B.
C.
D.
30.     94.   The president of the ________________________ holds a permanent seat on the FOMC.
A.
B.
C.
D.
E.
31.     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.
32.       3.   The Board of Governors of the Federal Reserve is comprised of
A.
B.
C.
D.
E.
33.     96.   Which of the following is not an example of crowding out?
A.
B.
C.
D.
E.
34.     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.
35.  The deficit that exists when the economy operates at full employment is called the __________ deficit.
A.
B.
C.
D.
36.  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.
37. 
Refer to Exhibit 11-1. The economy is currently at point 1. In this situation, Keynesian economists would most likely propose
A.
B.
C.
D.
38.  The AD curve shifts to the left with a __________ in government purchases (G) or a __________ in taxes.
A.
B.
C.
D.
39.     15.   Compared to barter, money __________ transaction costs, making transactions __________ time-consuming.
A.
B.
C.
D.
40.  A balanced budget occurs when
A.
B.
C.
D.
41.     12.   According to the text, the good that emerged as money in World War II POW camps was
A.
B.
C.
D.
42.     97.   Which piece of evidence is consistent with zero crowding out?
A.
B.
C.
D.
E.
43. 
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 $60,000, how much does he pay in taxes?
A.
B.
C.
D.
44.     18.   M1 is comprised of currency held outside banks + traveler’s checks + __________.
A.
B.
C.
D.
E.
45.     95.   The most important responsibility of the Fed is to
A.
B.
C.
D.
46.     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.
47.     25.   According to the text, L. Frank Baum, the author of The Wonderful Wizard of Oz, blamed ____________________ for the economic depression of 1893 and the related hardships faced by farmers and workers.
A.
B.
C.
D.
48.       9.   An expansionary fiscal policy will
A.
B.
C.
D.
E.
49.  A unit of account is
A.
B.
C.
D.
E.
50.       7.   Which of the following is not a major responsibility of the Fed?
A.
B.
C.
D.
51.  Fiscal policy refers to
A.
B.
C.
D.
52.     95.   If reserves equal $59 million and vault cash equals $29 million, it follows that
A.
B.
C.
D.
E.
53.     13.   In the Yap civilization of the South Pacific prior to 1920, large, heavy stones in the shape of a wheel were used as money. Which function of money was probably least served by this form of money?
A.
B.
C.
D.
54.  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.
55.     88.   The __________ rate is the interest rate one bank pays another bank for a loan.
A.
B.
C.
D.
E.
56.     79.   Banks in the United States operate under a fractional reserve system, which means they must maintain only a fraction of their deposits in the form of
A.
B.
C.
D.
57.     59.   The M2 money supply
A.
B.
C.
D.
E.
58. 
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.
59.     92.   The federal budget is balanced and the economy is on the upward-sloping portion of the Laffer curve. Then, tax rates are cut and government purchases are increased. Is a budget deficit inevitable?
A.
B.
C.
D.
60.  Which of the following statements is true?
A.
B.
C.
D.
E.
61. 
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 $20,000, how much does he pay in taxes?
A.
B.
C.
D.
62. 
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.
63.     14.   Money evolved out of the self-interested actions of
A.
B.
C.
D.
64.     94.   Both Jones and Smith agree that the economy is in a recessionary gap. Jones proposes a tax cut. Smith couldn't agree more. Jones says that lower taxes will result in higher Real GDP. Again, Smith couldn't agree more. It follows that
A.
B.
C.
D.
E.
65.     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.
66.     32.   Fractional reserve banking is a term used to describe a banking system whereby
A.
B.
C.
D.
E.
67.  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.
68.       6.   Which of the following is not a major responsibility of the Fed?
A.
B.
C.
D.
E.
69.  Which of the following illustrates the wait-and-see lag?
A.
B.
C.
D.
E.
70.  Elaine's taxable income increases by $1 and her tax payment increases by $0.28. Her marginal tax rate is
A.
B.
C.
D.
71.  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.
72.  A "flat tax" is another term for __________ tax.
A.
B.
C.
D.
73.     20.   Which of the following statements is true?
A.
B.
C.
D.
E.
74.     51.   Some of the crowding out of private expenditures may come in the form of
A.
B.
C.
D.
75.     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.
76.  Jim and Janet each buy a computer and each pays $200 in sales taxes. Jim's annual income is $40,000 and Janet's annual income is $60,000. The sales tax is
A.
B.
C.
D.
77. 
Refer to Exhibit 11-2. At point A, if we cut tax rates slightly, tax revenues
A.
B.
C.
D.
78.     35.   If checkable deposits in Bank A total $100 million and the required reserve ratio is 9 percent, then required reserves at Bank A equal
A.
B.
C.
D.
79.  121.   In the United States, paper currency is printed at the
A.
B.
C.
D.
80.  110.   The Fed is intended to be controlled by
A.
B.
C.
D.
81.  Barter is
A.
B.
C.
D.
82.  To an economist, money is a synonym for which of the following?
A.
B.
C.
D.
E.
83.  Suppose Congress increases income taxes. This is an example of
A.
B.
C.
D.
84.     34.   Required reserves are the amount of
A.
B.
C.
D.
85.     50.   The unit of account function of money refers to the
A.
B.
C.
D.
86.     10.   If a person uses money to buy a pair of shoes, money is functioning as
A.
B.
C.
D.
87.  What are the two types of discretionary fiscal policy?
A.
B.
C.
D.
88.     22.   A savings deposit is a type of
A.
B.
C.
D.
E.
89.     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.
90.     45.   When a bank makes a loan to one of its customers, to the bank the loan is classified as
A.
B.
C.
D.
91.  The AD curve shifts to the right with a __________ in government purchases (G) or a __________ in taxes.
A.
B.
C.
D.
92.     39.   The amount of required reserves a bank holds depends on the
A.
B.
C.
D.
93.  122.   Which of the following is not a monetary policy tool of the Fed?
A.
B.
C.
D.
E.
94.  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.
95.     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.
96.     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.
97.     71.   Which of the following Fed actions will increase the money supply?
A.
B.
C.
D.
E.
98.  109.   If the Fed purchases government securities from Bank A, __________ in the banking system __________ and the money supply __________.
A.
B.
C.
D.
E.
99. 
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.
100.  112.   The president of the Federal Reserve Bank of ________________ holds a permanent seat on the _________________________.
A.
B.
C.
D.
E.
101.       1.   The Federal Reserve System is the
A.
B.
C.
D.
102.     87.   Which of the following will lower the money supply?
A.
B.
C.
D.
E.
103.     52.   M2 includes M1 plus all of the following except
A.
B.
C.
D.
104.     10.   When a check is written on an account at Bank A and deposited in Bank B, the reserve account of __________ will rise and reserves of the entire banking system will __________.
A.
B.
C.
D.
105.     38.   Tenth National Bank holds $235,000,000 in checkable deposits and $25,500,000 in reserves. With a required reserve ratio of 10 percent, how much in excess reserves is Tenth National holding?
A.
B.
C.
D.
106.  If an economy has a structural surplus and a cyclical deficit, it may be concluded that
A.
B.
C.
D.
107.  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.
108. 
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)
118.   Refer to Exhibit 13-2.  What word (up or down) should go in the place of blank (1) and blank (2), respectively?
A.
B.
C.
D.
109.  If peanuts were widely accepted for purposes of exchange, then
A.
B.
C.
D.
E.
110.     56.   Money is defined by economists as
A.
B.
C.
D.
E.
111.  Which of the following illustrates the data lag?
A.
B.
C.
D.
112.  Which of the following is a correct listing of money's functions?
A.
B.
C.
D.
E.
113.     93.   A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent. This means the bank could have __________ in checkable deposit liabilities and __________ in (total) reserves.
A.
B.
C.
D.
114.     78.   Bank deposits at the Federal Reserve = $40 billion, vault cash = $2 billion, required reserve ratio = 0.10, and total checkable deposits = $400 billion. It follows that required reserves equal __________ billion, (total) reserves equal __________ billion and excess reserves equal __________ billion.
A.
B.
C.
D.
E.
115.  In which situation are transaction costs most likely to be the lowest?
A.
B.
C.
D.
116.  If the economy is on the downward-sloping portion of the Laffer curve, a(an) __________ in tax rates will __________ tax revenues.
A.
B.
C.
D.
E.
117.  Suppose Congress decreases income taxes. This is an example of
A.
B.
C.
D.
118.     44.   Bank A holds $1 million in required reserves and the required reserve ratio is 9 percent. It follows that Bank A holds checkable deposit liabilities that total approximately
A.
B.
C.
D.
119.     33.   Total bank reserves equal
A.
B.
C.
D.
120.     50.   The crowding-out effect suggests that
A.
B.
C.
D.
121.     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.
122.       2.   The Federal Reserve System began operations in
A.
B.
C.
D.
123.     31.   In the history of banking, warehouse receipts refer to receipts
A.
B.
C.
D.
124.     42.   Bank A has deposits of $200,000 and reserves of $24,000. If the required reserve ratio is 11 percent, the bank has excess reserves of
A.
B.
C.
D.
125.  If there is complete crowding out as a result of an increase in government purchases, there will be
A.
B.
C.
D.
126.  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.
127.     40.   Reserves held beyond the required amount are called __________ reserves.
A.
B.
C.
D.
128.  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.
129.       8.   __________ flows from government to households.
A.
B.
C.
D.
130.  Fiscal policy may not work as policymakers intend it to work because of
A.
B.
C.
D.
E.
131.     28.   Because money __________________, people are _________________ likely to specialize their work in a money economy.
A.
B.
C.
D.
132.  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.
133.     30.   According to the text, in the book version of The Wonderful Wizard of Oz, Dorothy's slippers are
A.
B.
C.
D.
134.  Money's basic advantage as compared to barter is that
A.
B.
C.
D.
135.     24.   M2 is comprised of
A.
B.
C.
D.
136.  The U.S. income tax is currently a __________ tax.
A.
B.
C.
D.
137. 
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.
138.     47.   Which of the following is true?
A.
B.
C.
D.
E.
139.  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.
140.  Which of the following is an example of crowding out?
A.
B.
C.
D.
141.  That part of the deficit due to output being below Natural Real GDP is called the __________ deficit.
A.
B.
C.
D.
142.  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.
143.     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.
144.  A federal budget surplus
A.
B.
C.
D.
E.
145.  Transaction costs are best defined as the
A.
B.
C.
D.
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