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If the Fed reduces a commercial bank's reserve requirements the commercial bank can

There is only one correct answer per question. select the best answer, even when there are other correct answers.
1 If the Fed reduces a commercial bank's reserve requirements the commercial bank can
a lend the extra reserve to the Fed
b Use the extra reserve to create more money
c eliminate its need for overnight lending
d use the extra reserve amount for facility expansion
2 Economics is about
a efficiency
b how to best use money
c resource allocation
d deciding who is affected by taxation
3 "The Fed Chairman is"
a elected for up to a maximum of 3 terms
b is the principal government officer in charge of all economic policy
c accountable to the President
d none of the above
4 If a price ceiling is set on gasoline nationwide,
a the economy would experience unprecedented prosperity
b most oil companies would go bankrupt
c supply and demand for gasoline will be at dynamic equilibrium
d shortage of gasoline would be likely
5 Monetary policy
a involves running a surplus and deficit
b involves changing money supply and taxes
c is managed by the Treasury Department
d none of the above
6 "If a central bank issues large quantities of money, that"
a would be inflationary
b is because some central bank lack independence form political control
c is because they feel that the risk of inflation is less than the risk of economic breakdown
d All of the above
7 Factors of production
a are not the same in different economies
b are only two in free enterprise economies
c include land and labor
d steel mills

8 Relative demand elasticity is high for
a healthcare
b food in general
c hot dogs
d Pepsi and Coke

9 "If real income has risen from $4 trillion to $4.2 trillion and the price level went up
by 10 percent, by how much has the nominal income risen?"
a $440 billion
b $400 billion
c $360 billion
d none of the above
10 "Tax and spend" is
a a classical economics concept in nature
b a Keynesian concept in nature
c primarily an emphasis on free enterprise economy
d a little used area of monetary policy
11 The supply curve represents a relationship between
a the producer and the market
b the suppliers and the firm
c price of a product and its production quantity
d produced goods and the economy as a whole
12 "When oranges are plentiful as a result of a good growing season, what happens to the market price of oranges?"

a It goes up.
b It goes down.
c It widely fluctuates
d None of the above
13 The most important reason for branding is to make a product
a more appealing to the consumer
b relatively more demand elastic
c distinguishable from competing products only
d relatively demand inelastic
14 Keynesian economics favors government spending and is
a a classical economics concept in nature
b essentially not an economic concept
c a part of fiscal policy
d a part of monetary policy
15 In fiscal policy
a the Fed chairman usually recommends policy choices to the government
b the President and the Congress play key roles
c interest rates are not affected by the policy
d deficits are unimportant
16 Economics is mainly about

a efficiency only
b resource allocation
c how to best use money
d deciding who is affected by taxation
17 Economics is
a the science of who gets what and how
b allocation of scarce resources among alternative uses
c authoritative allocation of scarce resources and values
d how totality of a system functions with respect to land, labor and capital

18 Equilibrium price is established when
a Marginal Cost is equal to Average Cost
b Average Revenue is equal to demand
c supply and demand curves intersect
d Marginal Revenue is greater than Marginal Cost
19 Tariffs are
a an import tax
b a restriction on the amount of imports of a foreign good
c Only applied to strategic goods
d none of the above
20 If labor is displaced by technology
a the displaced workers would not be able to find jobs again
b The displaced workers are better off going to a different sector of the economy
c productivity of the firm will be diminished
d re-training would be a reasonable strategy for the workers to find new jobs

21 A Federal Reserve Bank

a is primarily in the business of consumer lending with insured deposits
b is established with the sole purpose of holding bank reserves
c is an agency of the US government
d Is a non-profit bank to make business loans
22 Why do Rolling Stones receive more income from a single concert than a school teacher may receive for a lifetime of work?
a Because Rolling Stones deserve more money
b Because demand for Rolling Stones performance is relatively elastic
c Because demand for Rolling Stones performance is relatively inelastic
d Because the economy does not favor teaching
23 The equilibrium price will rise if the
a demand falls and supply remains constant
b demand falls and supply rises
c demand and supply both rise
d demand rises and supply falls
24 In economics, all resources are scarce
a except in highly productive economies
b except where technology is a major component of production
c except where the labor force is continuously trained and re-trained
d none of the above
25 John Maynard Keynes
a is the father of classical economics
b was an advocate of tax cuts to stimulate the economy
c was an advocate of government spending to boost the economy
d Both b and c

26 Opportunity Cost is a concept
a used to comply with Generally Accepted Accounting Principles
b The cost of the next best alternative
c really the same as Marginal Cost of producing an item
d none of the above
27 Deficit spending is
a can not be undertaken by small governments
b an established monetary policy tool
c can only be implemented by the Fed
d an established fiscal policy tool
28 What annual deficit could a $55 billion economy growing at a real annual rate of 5% have without changing its debt burden?
a $150 million
b $250 million
c $350 million
d none of the above
29 The effect of contractionary monetary policy on the exchange rate through income and price:
a It pushes up the interest rate
b It decreases income and, thus, imports
c It has a tendency to decrease inflation
d All of the above results in increase of the exchange rate
30 The following topics are included in Macroeconomics except
a Impact of taxes on aggregate output
b the effect of trade on economic growth
c how firms set the price and quantity of their products
d military spending
31 Firms prefer quotas to tariffs because
a with quotas they receive more profits
b with tariffs they receive more profits
c neither makes a difference a firm
d none of the above
32 Inflation can reduce debt because
a it reduces the value of the currency, so debt is paid back with cheaper money
b it reduces the value of the currency and actually reduces debt
c both of the above
d none of the above
33 The cost of printing is always lower than the cost of money. That being the case, why doesn't the Fed just print lots of money

a To have value, the supply of money has to be limited
b The Fed does that all the time anyway
c The decision to print money can only come from the Congress
d None of the above
34 Banks prefer to have many depositors rather than one big one. Why?
a Large number of depositors bring stability to the bank
b The bank will be in trouble if a single large depositor decides to close her account.
c Banks are unwilling to make money on the "float."
d a and b

35 A country with comparative advantage in production of wine should
a export its wine
b impose a tariff on wine from other countries
c not specialize in producing wine
d impose a quota on imported wine
36 A strong currency
a is harmful to the economy
b facilitates exports
c facilitates imports
d is trade-neutral
37 "If a government does nothing to stem its currency value decline in international
markets,"

a it is probably aiming at reducing unemployment at home
b it is probably because of an incompetent government that does not understand economics
c it is probably because the government wants to encourage imports
d none of the above
38 Everything else being the same, if inflation goes up in the US,
a the dollar exchange rate against other currencies will go up
b the dollar exchange rate against other currencies will go down
c the dollar exchange rate against other currencies will remain unchanged.
d None of the above
39 Economists advocate free trade because
a trade restrictions lower aggregate output
b trade restrictions reduce international competition
c there could be harmful trade wars
d all of the above
40 "Demand primarily includes "
a want, need and necessity
b the ability to buy and necessity
c the ability and willingness to buy
d none of the above

Solution Preview

There is only one correct answer per question. select the best answer, even when there are other correct answers.

1 If the Fed reduces a commercial bank's reserve requirements the commercial bank can
a lend the extra reserve to the Fed
b Use the extra reserve to create more money
c eliminate its need for overnight lending
d use the extra reserve amount for facility expansion

b Use the extra reserve to create more money

2 Economics is about
a efficiency
b how to best use money
c resource allocation
d deciding who is affected by taxation

c resource allocation

3 "The Fed Chairman is"
a elected for up to a maximum of 3 terms
b is the principal government officer in charge of all economic policy
c accountable to the President
d none of the above

d none of the above

http://en.wikipedia.org/wiki/Chairman_of_the_Federal_Reserve.

4 If a price ceiling is set on gasoline nationwide,

a the economy would experience unprecedented prosperity
b most oil companies would go bankrupt
c supply and demand for gasoline will be at dynamic equilibrium
d shortage of gasoline would be likely

d shortage of gasoline would be likely

5 Monetary policy
a involves running a surplus and deficit
b involves changing money supply and taxes
c is managed by the Treasury Department
d none of the above

d none of the above

6 "If a central bank issues large quantities of money, that"
a would be inflationary
b is because some central bank lack independence form political control
c is because they feel that the risk of inflation is less than the risk of economic breakdown
d All of the above

a would be inflationary

7 Factors of production
a are not the same in different economies
b are only two in free enterprise economies
c include land and labor
d steel mills

c include land and labor

8 Relative demand elasticity is high for
a healthcare
b food in general
c hot dogs
d Pepsi and Coke

c hot dogs

9 "If real income has risen from $4 trillion to $4.2 trillion and the price level went up by 10 percent, by how much has the nominal income risen?"
a $440 billion
b $400 billion
c $360 billion
d none of the above

As the increase is Increase in real income/(1-price level%)
=200 bn/.9
=$222.2

d none of the above

10 "Tax and spend" is
a a classical economics concept in nature
b a Keynesian concept in nature
c primarily an emphasis on free enterprise economy
d a little used area of monetary policy

b a Keynesian concept in nature

11 The supply curve represents a relationship between
a the producer and the market
b ...

$2.19