MULTIPLE CHOICE: Please select the best answer for the following ...

MULTIPLE CHOICE: Please select the best answer for the following questions. (30 points)
111. The calculation of GDP would include
a. profits on the sale of a 25-year-old house.
b. the monetary value of someone babysitting in exchange for a room.
c. the income of a high school English teacher.
d. the price of the steel used to build a new hotel.
112. Products that would be used in calculating the United States GDP include
a. toys manufactured in China at a factory owned by a U.S. company.
b. cars manufactured in Tennessee at a factory owned by a Japanese automobile
company.
c. plastic manufactured in a factory in Kentucky and sold to toy manufacturers
around the world to make plastic toys.
d. cotton cloth manufactured in India and sold to clothes makers in the United
States.
113. A massive hurricane hits the United States, wiping out all industry along the
Atlantic Coast. The event sends the economy into a downward spiral. In this case,
economists would say the business cycle was influenced by
a. business investment.
b. interest rates and credit.
c. consumer expectations.
d. external shocks.
114. What is considered a normal unemployment rate when the economy is working
properly?
a. 0 to 3 percent
b. 4 to 6 percent
c. 8 to 10 percent
d. 10 to 12 percent
115. Jessie’s grandfather is always telling him that a dollar went farther when he was a
child than it does today. He means that
a. currency was more durable when he was young.
b. a dollar had more purchasing power when he was young.
c. young people today do not take care of their money.
d. U.S. currency is used in more foreign countries today.
116. When Alison, a college math professor, leaves her job at a small rural college and
starts looking for a job at a large urban university, she is
a. frictionally unemployed.
b. structurally unemployed.
c. cyclically unemployed.
d. underemployed.

117. The U.S. government’s authority to tax comes mainly from the
a. current Congress.
b. demands of citizens.
c. Constitution.
d. government officials.
118. Why does the federal government collect income taxes throughout the year as
people earn wages?
a. so that people do not realize exactly how much tax they are paying
b. so that the money can be put aside until it is needed
c. so that the government can pay bills as they come due
d. so that taxpayers can qualify for refunds of excess taxes
119. According to Keynesian economics, the government could prevent, or reduce the
severity of, inflation by
a. increasing transfer payments.
b. applying an expansionary fiscal policy.
c. increasing federal spending.
d. applying a contractionary fiscal policy.
120. How do budget deficits contribute to the national debt?
a. The national debt is increased by double each budget deficit.
b. The national debt is increased by each budget deficit.
c. The national debt is reduced by each budget deficit.
d. The national debt is not affected.
121. Why does a bank sometimes hold excess reserves?
a. to make interest rates go up
b. to make check clearing easier
c. to be sure it can meet customer demands
d. to protect themselves from the high cost of borrowing
122. The Federal Reserve regulates the required reserve ratio in order to
a. control the amount of money in circulation.
b. reduce lags in monetary policy.
c. discourage banks from making risky loans.
d. change the discount rate more easily
123. What are Federal Reserve Districts?
a. the committee that makes the key monetary policy decisions about interest rates
and money supply
b. the geographic areas into which the Federal Reserve Act divided the United States
c. the twelve regional banks that monitor and report on banking conditions in
specific geographic areas
d. the cities with the largest financial institutions across the United States

124. The main purpose of the FDIC is to make sure that
a. commercial and investment banks do not fail.
b. customers do not lose money if a bank fails.
c. banks charge a fair amount of interest on loans.
d. the government has enough gold to cover its expenses
125. Which of the following is a main economic variable that affects business cycles?
a. stagflation
b. national income accounting
c. interest rates
d. personal savings.