Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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Part 1: Main Idea
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1.
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Expansionary monetary policy is sometimes called
a. | circulation-money policy | b. | easy-money policy | c. | lending-money
policy | d. | money-flow policy |
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2.
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With voluntary exchange, a buyer and seller agree to do business together
a. | only for the benefit of the seller | b. | only for the benefit of the
buyer | c. | for the mutual benefit of both | d. | for the benefit of
neither |
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3.
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Which of the following best describes wants?
a. | limited and ever changing | b. | unlimited and ever changing | c. | limited and never
changes | d. | unlimited and never changes |
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4.
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An advantage of a pure market economy is that it
a. | has mechanisms for providing public goods | b. | allows local
communities to set their own economic development | c. | provides security to those who are not
economically productive | d. | prevents unequal distribution of
wealth |
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5.
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Monetarists disapprove of the Fed's use of the monetary policy to
a. | constantly change the money supply | b. | decrease the money supply | c. | occasionally change
the money supply | d. | stabilize the money supply |
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6.
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Demand deposits are
a. | checking accounts | b. | savings accounts | c. | certificates of
deposit | d. | money market accounts |
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7.
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The Federal Reserve System is
a. | a set of vaults used to store the national treasury | b. | twelve regional
banks with a central decision-making board | c. | an agency in Washington, D.C., that must
approve all banking policies | d. | a network of local banks with a special
national charter |
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8.
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Jake's Auto Repair shop deposits $10,000 in a bank. Which action could
increase the money created by this deposit?
a. | increasing the federal funds rate | b. | increasing the required reserve
ratio | c. | reducing the federal funds rate | d. | reducing the required reserve
ratio |
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9.
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Into what four categories do economist divide factors of production?
a. | land, labor, capital, and entrepreneurship | b. | land, labor, money,
and entrepreneurship | c. | resources, labor, capital, and
entrepreneurship | d. | resources, labor, money, and entrepreneurship |
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10.
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Expansionary fiscal policy is likely to
a. | cause interest rates to fluctuate | b. | have no affect on interest
rates | c. | lower interest rates | d. | raise interest
rates |
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11.
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The Fed is different from most countries' central banks because it
has
a. | both a national and regional structure | b. | both a national and international
structure | c. | only a national structure | d. | only a regional
structure |
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12.
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Wildcat banks were banks
a. | in remote areas that issued bank notes of questionable value | b. | in frontier regions
that were used mostly by trappers and traders | c. | that tried to take the federal bank's
business by issuing cheaper bank notes | d. | that preyed on and took over smaller
banks |
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13.
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Banks borrow more money from the Fed when the
a. | discount rate decreases | b. | discount rate increases | c. | prime rate
decreases | d. | prime rate increases |
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14.
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Which of the following explains economics as it is, not as it should be?
a. | microeconomics | b. | macroeconomics | c. | positive
economics | d. | normative economics |
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15.
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Fractional reserve banking
a. | enables a consumer to buy a house by spacing payments over many
years | b. | enables consumers to take out large loans by offering property as
security | c. | allows banks to charge interest for the loans they make to
consumers | d. | allows banks to issue loans based on a reserve requirement set by the
Fed |
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16.
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What does the saying "There is no such thing as a free lunch"
mean?
a. | some things cost nothing | b. | most things cost nothing | c. | most things cost
something | d. | everything costs something |
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17.
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Which term means "making decisions based on what you believe is the best
combination of costs and benefits?"
a. | economizing | b. | budgeting | c. | cutting
back | d. | motivating |
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18.
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If inflation increases sharply, which would help banks make a profit?
a. | decreasing the discount rate | b. | decreasing the federal funds
rate | c. | increasing the prime rate | d. | increasing the required reserve
ratio |
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19.
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A primary duty of a central bank is to lend money
a. | to businesses | b. | to individual customers | c. | without making a
profit | d. | only to the government |
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20.
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Which action by the Fed would most likely slow down inflation?
a. | buying bonds and deceasing reserve requirements | b. | buying bonds and
increasing reserve requirements | c. | selling bonds and increase reserve
requirements | d. | selling bonds and decreasing reserve requirements |
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21.
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One of the advantages of bank mergers is
a. | more bank branches | b. | more choices for consumers | c. | less bank
involvement in community | d. | competition from foreign
banks |
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22.
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What is another named for the production possibilities curve?
a. | production possibilities border | b. | production possibilities
frontier | c. | production possibilities perimeter | d. | production possibilities
edge |
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23.
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The nation where government plays the most limited role in the economy is
a. | North Korea | b. | Sweden | c. | France | d. | the United
States |
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24.
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Sarah's demand for money to run her clothing store has increased. Which
could have caused this situation?
a. | cost of cotton decreased significantly | b. | food prices increased
slightly | c. | gasoline prices increased significantly | d. | number of
Sarah's customers decreased suddenly |
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25.
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The money supply can be expanded by
a. | changing the required reserve ratio from 5 percent to 10 percent | b. | changing the
required reserve ratio from 10 percent to 5 percent | c. | keeping the required reserve ratio stable at 5
percent | d. | keeping the required reserve ratio stable at 10
percent |
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26.
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What does a point inside the curve of a PPC indicate?
a. | all resources are fully employed | b. | not all resources are fully
employed | c. | more resources are required | d. | less resources are
required |
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27.
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Which of the following buys goods for personal use?
a. | consumer | b. | producer | c. | advocate | d. | client |
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28.
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Which is usually a short-term effect of adjustments to monetary policy?
a. | changes in interest rates | b. | contraction of the economy | c. | expansion of the
economy | d. | increased investments in businesses |
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29.
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When a nation's economy nationalizes it changes from
a. | private ownership to public ownership | b. | public ownership to private
ownership | c. | government ownership to private ownership | d. | government ownership
to public ownership |
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30.
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One of the physical properties of money is
a. | acceptability | b. | portability | c. | scarcity | d. | stability of
value |
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31.
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The main difficulty of a barter system is finding
a. | a form of money that both parties will accept | b. | two people who have
what each other wants | c. | a third party to evaluate the goods to be
traded | d. | trade goods that will retain their value over time |
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32.
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Which statement is accurate?
a. | District banks are responsible for carrying out the policy set forth by the President
of the United States. | b. | The Federal Open Market Committee supervises
the sale and purchase of state government securities. | c. | The members of the Board of Governors are
elected to 14-year terms. | d. | Stocks purchased from the Federal Reserve
district banks may not be bought or sold on the open market. |
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33.
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The First Bank of the United States was created by
a. | Alexander Hamilton | b. | Andrew Jackson | c. | Thomas
Jefferson | d. | James Madison |
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34.
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Which of the following examines the costs and expected benefits of a
choice?
a. | choice-benefit analysis | b. | cost-profit analysis | c. | cost-benefit
analysis | d. | choice-profit analysis |
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35.
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Automatic teller machines are good for banks because they
a. | charge money for every transaction completed | b. | save money because
machines do transactions more cheaply than humans | c. | allow banks to construct more branch
buildings | d. | force people to use the bank's machines, not competitors'
machines |
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36.
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The main difference between a credit union and a bank is that
a. | banks can offer checking accounts | b. | banks require minimum deposits for
savings | c. | credit unions can offer car loans | d. | credit unions have membership
requirements |
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37.
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Which person could the Fed help?
a. | a victim of auto loan fraud | b. | a person in a severe car
accident | c. | a person whose wallet was stolen | d. | a worker injured on the
job |
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38.
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Absolute loyalty to the people in power is required by a(n)
a. | traditional system | b. | socialist system | c. | authoritarian
system | d. | market system |
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39.
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Which of the following involves using resources to produce the maximum amount of
goods and services?
a. | utilization | b. | underutilization | c. | efficiency | d. | overefficiancy |
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40.
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The way a society uses scarce resources to satisfy its people's unlimited
wants is called an economic
a. | system | b. | utility | c. | incentive | d. | grid |
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41.
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Which is not considered a need?
a. | food | b. | clothing | c. | shelter | d. | television |
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42.
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One example of a stored-value card is a(n)
a. | credit card | b. | debit card | c. | gift
card | d. | insurance card |
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43.
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One example of a loan is a purchase made with
a. | cash | b. | a check | c. | a credit
card | d. | a stored-value card |
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44.
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The demand for money would probably increase when
a. | the bank raises interest rates | b. | a person goes on a vacation | c. | a person's
salary is lowered | d. | the price of bananas
drops |
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45.
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Which is especially useful for comparing data?
a. | line graph | b. | bar graph | c. | pie
graph | d. | circle graph |
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46.
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The Fed is responsible for
a. | holding money in reserve for individuals living in poverty | b. | loaning money to
banks in an area hit hard by a hurricane | c. | providing loans to a business on the verge of
bankruptcy | d. | supervising the accounting practices of corporations |
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47.
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One of the economic properties of money is
a. | divisibility | b. | durability | c. | scarcity | d. | uniformity |
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48.
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When unemployment is high, the Fed may
a. | buy bonds, decrease the reserve requirement, and decrease the discount
rate | b. | buy bonds, increase the reserve requirement, and decrease the discount
rate | c. | sell bonds, decrease the reserve requirement, and decrease the discount
rate | d. | sell bonds, increase the reserve requirement, and increase the discount
rate |
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49.
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A central bank is
a. | a bank centrally located in a region | b. | a bank that has many
branches | c. | a city's primary bank | d. | a nation's main monetary
authority |
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50.
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Which economic term is defined as the desire to have a good or service and the
ability to pay for it?
a. | complement | b. | demand | c. | elasticity | d. | substitute |
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51.
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Which interest rate is better for consumers?
a. | 8 percent | b. | 9 percent | c. | 10
percent | d. | no difference for consumers |
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52.
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In a communist economy, resources are owned by
a. | businesses | b. | government | c. | individuals or the
government | d. | individuals or businesses |
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53.
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With capitalism, investment is driven by
a. | government controlled cooperatives | b. | governments seeking profits | c. | private parties
following government policies | d. | private parties seeking
profits |
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54.
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The desire and ability to produce and sell a product is
a. | demand | b. | production | c. | profit | d. | supply |
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55.
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The law of supply states that
a. | when prices go up, quantity supplied goes down; when prices go down, quantity
supplied goes up | b. | when prices go down, quantity supplied goes down; when prices go up, quantity
supplied goes up | c. | when prices go up, supply goes down; when prices go down, supply goes
up | d. | when prices go down, supply goes down; when prices go up, supply goes
up |
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56.
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Which of the following restates the law of demand?
a. | When prices go down, demand increases; when prices go up, demand
decreases. | b. | When prices go up, demand increases; when prices go down, demand
decreases. | c. | When prices go down, quantity demanded increases; when prices go up, quantity
demanded decreases. | d. | When prices go up, quantity demanded increases;
when prices go down, quantity demanded decreases. |
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