Supply-side economics is based on the theory that:
a. budget deficits will stimulate demand, output, and employment.
b. budget deficits will lead to higher interest rates, which will weaken their
expansionary impact.
c. higher tax rates will increase tax revenues.
d. increases in aggregate supply lower the price level.
What is the economic criterion most often used to compare living standards across
countries?
a. Real GDP growth.
b. Unemployment rate.
c. Incidence of AIDS.
d. Rate of population growth.
e. Real per capita GDP.
The national debt is unlikely to cause national bankruptcy because the:
a. national debt can be refinanced by issuing new bonds.
b. interest on the public debt equals GDP.
c. national debt cannot be shifted to future generations for repayment.
d. federal government cannot refinance the outstanding national debt.
Which of the following laws increased competition among financial institutions and
gave the Fed greater control over nonmember banks?
a. The Federal Reserve Act.
b. The Equal Credit Opportunity Act.
c. The Monetary Control Act.
d. The Thrift Bailout Bill.
Fiscal policy is government action to influence aggregate demand and in turn to
influence the level of real GDP and the price level, through:
a. expanding and contracting the money supply.
b. regulation of net exports.
c. changes in government spending and/or tax revenues.
d. encouraging businesses to invest.
When the Fed sells government securities, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the
general public.
b. raises the cost of borrowing from the Fed, discouraging banks from making loans to
the general public.
c. increases the amount of excess reserves that banks hold, encouraging them to make
loans to the general public.
d. increases the amount of excess reserves that banks hold, discouraging them from
making loans to the general public.
e. decreases the amount of excess reserves that banks hold, discouraging them from
making loans to the general public.
According to the Keynesian model, an economy will have persistent, high
unemployment if:
a. the government runs a budget deficit.
b. markets operate freely.
c. its total spending is too low.
d. firms make too many investments.
Which of the following appears on the liability side of the Fed’s balance sheet?
a. Federal Reserve notes.
b. U.S. government securities.
c. Loans to banks.
d. All of these.
If the government imposes a price floor above the market equilibrium price, then:
a. b and e.
b. there will be excess supply.
c. there will be excess demand.
d. consumers will benefit.
e. producers will benefit.
Which of the following is in charge of the buying and selling of government securities
by the Fed?
a. The president.
b. The Federal Open Market Committee.
c. The Congress.
d. None of these.
Government programs that automatically shift the government budget toward a deficit
during recessions and a surplus during recoveries are called:
a. discretionary fiscal policy.
b. automatic stabilizers.
c. progressive taxation.
d. price deflators.