Aggregate demand differs from regular demand in that aggregate demand

1. Aggregate demand differs from regular demand in that aggregate demand • Measures demand for the entire economy, rather than one market • Is only used when trying to measure money markets • Includes supply as well as demand • Is inelastic while regular demand is elastic

2. If the U.S. economy was in a recession, which fiscal policy would be most appropriate to get out of the recession? • Decrease government spending, the citizens will have more money to spend • Decrease taxes, people have more disposable income • Raise the reserve requirement, banks will have more money to loan • Buy bonds on the open market, the money supply will increase

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4. When the Fed is conducting open market operations, they are • Buying or selling government bonds • Buying or selling stocks on the New York Stock Exchange • Buying or selling factors in the factor market • Buying or selling goods in the product market

5. When the Federal Reserve buys securities on the open market, they are hoping to • Encourage people to save more money. • Expand the money supply and increase GDP. • Reduce the amount of money banks are required to hold the reserves. • Shrink the money supply and discourage inflation.

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7. Unemployment that occurs as a result of a recession or an economic downturn is • Frictional • Seasonal • Structural • Cyclical

8. Which is NOT something governments typically do in market economies? • Resolve market failures • Protect rights • Set prices • Provide public goods

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10. The total amount of goods and services produced throughout the economy is • Aggregate supply • Quantity supplied • Supply shock • Aggregate demand

11. A person trying to find the unemployment rate in a country needs which two pieces of information? • The total number of jobs and the number of people without jobs • The number of unemployed people and the number of discouraged workers • The number of unemployed people and the population • The number of unemployed people and the number in the labor force

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13. The unemployment rate, GDP, and CPI can be used to determine • The supply and demand of a market • Which stage of the business cycle and economy is on • If a country uses a market or command economy • How likely a person is to get credit

14. In country A, everyone pays a 10% income tax. This type of tax system is known as • Sales • Progressive • Regressive • Proportional

15. If an economy experiences the following: 12% inflation (very high), 2.5% unemployment (very low), and high investment, they are MOST LIKELY on which part of the business cycle? • Recession • Contraction • Expansion • Trough

16. Adding everything the U.S. Government owes calculates the • National deficit • Unemployment rate • National debt • Balance of payments

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18. Assume the U.S. Government’s most recent fiscal policy slowly caused the economy to speed up and enter an expansion. Most likely, the government • Increased taxes • Increased the reserve requirement • Decreased the discount rate • Decreased taxes

19. You hear on the radio that the Fed is lowering the discount rate and buying a large number of treasury bonds. Based on this information, which part of the business cycle does the Fed most likely believe the economy is in? • Expansion • Peak • Contraction • Unemployment

20. National deficits are different than the national debt because • Deficits occur when expenditures exceed revenues for 1 fiscal year • Only deficits vary from year to year • Deficits are calculated using all previous deficits • Debts are consistently repaid and deficits cannot be

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22. By comparing the real GDP of two time periods a person can measure the • Consumer price index • Inflation rate • Economic growth rate • Unemployment rate

23. Assume an economy is having high unemployment and low GDP. Which fiscal policy would be most appropriate to correct this situation? • Increase the discount rate • Decrease government spending • Decrease taxes • Increase the reserve requirement

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25. If the CPI for the last three months has been 100, 101, 104, then what DEFINITE conclusion can you make about the economy? • The production possibilities curve has shifted • Prices have increased • GDP is improving • Unemployment has decreased

26. Comparing real GDP between two consecutive years is MOST useful in determining which economic measurement? • Equity • Exchange rates • Equilibrium price • Economic growth

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28. An economy that is at full employment • Has close to zero cyclical unemployment • Has found a job for everyone • Has close to zero frictional and structural unemployment • Has only seasonal unemployment

29. A market basket represents a long list of goods and services that the average household buys in a given time period. By dividing a market basket of goods and services from one time period by a market basket from another time period a person can calculate the • Gross domestic product • Consumer price index • Unemployment rate • Aggregate supply

30. Which person would be hurt the MOST by sudden inflation? • Sally, who has a fixed payment on a mortgage • Jim, who works at a company that gives raises every year • Pedro, who receives income from the stock portfolio • Marie, who is retired and lives on a fixed income

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32. A market basket is generally used for • Comparing prices of standard goods between years to determine inflation • Putting things in while you walk around the store • Advertising new products for companies • Determining how much GDP is produced every year

33. If an economy is in a trough on the business cycle • Unemployment is high, real GDP growth is low, and inflation is low • Unemployment is low, real GDP growth is high, and inflation is high • Unemployment is low, real GDP growth is low, and inflation is low • Unemployment is high, real GDP growth is high, and inflation is low

34. Unemployment characterized by large numbers of workers who have recently been replaced by machines or laid-off due to technological improvements is considered to be which kind of unemployment? • Cyclical • Frictional • Structural • Seasonal

35. Gross Domestic Product is a method for calculating how much a country produces by adding which four spending categories? • Consumption, Interest Rates, Government, Net Exports • Consumption, Investment, Government, Business expenditures • Consumption, Investment, Government, Net Exports • Wages, Rent, Interest, Dividends

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37. Which is used to measure economic growth? • Real GDP • Interest rates • Inflation • Unemployment

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39. In the United States economy, the role of money is to • Create jobs in the factor market • Control inflation • Set prices on goods and services • Facilitate exchange between buyers and sellers

40. Which set of information would indicate that an economy is on the recovery phase of the business cycle? • Low inflation, increasing unemployment, decreasing GDP • Increasing inflation, decreasing unemployment, increasing GDP • Increasing inflation, increasing unemployment, increasing GDP • Decreasing inflation, increasing unemployment, decreasing GDP

41. When calculating GDP, the purchase of a new factory is counted as • Net exports • Investment • Government • Consumption

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43. The consumer price index is used primarily to measure the • Economic growth of a country • Unemployment rate • Production possibilities curve • Inflation rate

44. Sharlee was recently laid off from her job at a manufacturing plant when the company she worked for brought in a machine to replace her. This is classified as what type of unemployment? • Seasonal • Cyclical • Structural • Frictional

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46. Which BEST describes GDP? • GDP is used to determine the inventories of business around the US. • GDP measures the market value of all goods and services economy in a given time period. • It is the data used to determine how many people are employed.

47. What is MOST LIKELY to happen to the economy if the Federal Reserve Bank increases the discount rate at the same time that Congress passes a law reducing government spending? • Contraction, because both of the policies are contractionary. • Expansion, because both of the policies are expansionary. • Nothing, because the policies cancel each other. • Nothing, because one is a fiscal policy and the other is a monetary policy.

48. If the Fed buys treasury securities on the open market at the same time that the government drastically increases spending, then • It is obvious both institutions thought the economy was on a peak. • The business cycle will invert. • The policies will cancel each other and there will be no change in the economy. • Aggregate demand is likely to increase causing inflation.

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50. Monetary Policy is defined as • Decisions of the Federal Reserve System that determine the monetary supply • Buying and selling of currency in foreign exchange markets • Interaction of buyers and sellers in the market place • Taxing and spending decisions of the United States Government