Week 6 Assignment

Week 6 Assignment – Quiz

1. Which of the following best defines government revenue?

Government programs designed to improve economic equity
Income the government receives from taxes and other nontax sources
Money the government spends to buy goods and services
A tax for which high-income earners pay a larger fraction of their income in taxes than low-income earners

2 Which of the following is the definition of government expenditures?

Money the government spends to buy goods and services
An itemized summary of probable government revenue and expenses for a given period
Central bank actions using interest rate or money supply tools to achieve goals such as stable prices, maximum employment, and moderate long-term interest rates
The total market value, expressed in dollars, of all final goods and services produced in an economy in a given year

3 To calculate real gross domestic product (GDP), gross domestic product must be adjusted for which variable?

Population
Inflation
Deficit
Debt

4 Which of the following is an automatic stabilizer in the economy?

Spending on national defense
Provision of unemployment compensation
Spending on education
Provision of Social Security and Medicare

5 If government is increasing spending and decreasing taxes, what type of policy is it conducting?

Expansionary monetary policy
Contractionary monetary policy
Contractionary fiscal policy
Expansionary fiscal policy

6 Which of the following is true of active fiscal policy actions?

Policymakers can pinpoint the economic outcomes of their policies.
The political process makes it easy to pass needed actions in times of economic crisis.
Economic conditions will stay the same without policymaker action.
It is often difficult for policymakers to know whether policies had any impact on the economy.

7 If data indicate the economy is in recession and members of Congress are working to pass legislation to encourage economic growth, which of the following has almost certainly occurred?

Realization of results
Recognition of change in the economy
Implementation of policy
Analysis of policy’s effectiveness

8 During a contractionary phase of the business cycle, which of the following most likely occurs?

More tax revenues are remitted
More goods and services are produced
Fewer people are unemployed
Fewer people are employed

9 Which of the following best defines inflation:

The rapid increase in the price of a specific good, such as gasoline
A general, sustained upward movement of prices for goods and services in an economy
The fluctuation in revenue and expenditures caused by Congress and the president
An increase in the national debt caused by ongoing deficit spending

10. Which of the following is a severe and long-lasting economic downturn that is worse and deeper than a recession?

A contraction
The business cycle
An expansion
A depression

11 In an economy experiencing a recession, with many unemployed resources, an increase in the money supply (M) would most likely lead to which scenario in the short run?

An increase in velocity (V) and then an increase in the price level (P)
An increase in price level (P) and then an increase in the quantity of goods and services produced (Q)
An increase in the quantity of goods and services produced (Q) and then an increase in the price level (P)
An increase in the price level (P), then an increase in velocity (V)

12 If the money supply (M) increases while velocity (V) and quantity (Q) remain constant, the price level (P) will increase, which means there is inflation.

True

False

13 The primary credit rate serves as the target for open market operations.

True

False

14 Which of the Federal Reserve’s monetary policy tools is associated with its role as lender of last resort but is used primarily as a signal of the Fed’s policy intentions?

Open market operations
The discount rate
Reserve requirements
Interest on reserves

15 Which monetary policy tool is the Federal Reserve using when it buys and sells government securities?

Open market operations
The discount rate
Reserve requirements
Interest on reserves

16 During a period when unemployment is high and economic growth is stagnant, Federal Reserve policymakers might decide to pursue an expansionary monetary policy.

True

False

17 In the long run, increasing the money supply will most likely lead to deflation.

True

False

18 Central bank independence is most strongly linked with price stability.

True

False

19 If the inflation rate were falling and the unemployment rate were high and rising, the FOMC would likely respond by doing which of the following?

Increasing the federal funds target rate and selling government securities
Increasing the federal funds target rate and buying government securities
Decreasing the federal funds target rate and selling government securities
Decreasing the federal funds target rate and buying government securities

20 Which of the following is one of the Federal Reserve System’s two policy goals (also called its dual mandate)?

Economic growth
Increasing personal incomes
Rising stock market values
Price stability