Question

1. If actual GDP is below potential GDP, then the unemployment rate is _____________ the natural rate.  A) below     B) above     C) right at     D) cannot be determined without inflation rate

2. Fiscal policy affects the economy through: A) Taxes     B) Government Spending     C) Interest Rates     D) Taxes and Government Spending

3. The Federal Reserve Bank’s decisions on monetary policy are made by the:

1. Board of Governors  B) FOMC     C) Reserve Banks     D) Federal Reserve Bank of New York

4. One of the FED’s responses to the COVID crisis has been to:

1. Lower the federal funds rate to zero     B) sell US Treasuries     C) Authorize over $3t in additional federal government spending     D) All of the above are correct

5. If C=450+0.9Y, then the marginal propensity to consume is:

1. 0.1     B) 0.9     C) 10     D) Unknown, because we do not know GDP

6. The most important function of money is that it serves as a:

1. Store of value     B) standard of value     C) Medium of Exchange     D) Measure of Inflation

7. If there is more spending in the Income-Expenditures Model, the 45-degree line will:

       A) shift up     B) shift down     C) never shift     D) be parallel to the spending line

8. The following is true: A) NX = X + M     B) Y = SP     C) C + I = G + NX     D) GDP = Y

9. The natural rate of unemployment is when it is just:

1. 0     B) low     C) cyclical unemployment     D) frictional and structural unemployment

10. Keynes publishes ________________ in _________________.

1. The Wealth of Nations, 1776     B) Billy, My Goat and My Friend, 1875     C) Poverty and Inequality, 1907     D) The General Theory of Employment, Interest, and Money, 1936

11. The goals of the FED are:

1. Strong stock market and unemployment at the natural rate     B) zero inflation and 4% GDP growth     C) Sustainable economic growth and price and financial stability     D) inflation greater than 3% and unemployment at the natural rate

12. There are __________Reserve Banks in the Federal Reserve System.

1. 7          B) 10          C) 12          D) 14

13. Fiscal policy has _____________ inside lags.  A) long     B) short     C) no     D) 30 day

14. The Chair of the FED today is: A) Hans Cole    B) Janet Yellen    C) Jerome Powell      D) JR Ewing

15. The following is false: A) M2 is larger than M1   B)  Currency is not the only financial asset considered money  C) The FED does not create money   D) All of these are true

16. Investment spending depends mainly on: A) interest rates and return on invested funds

2. Income and Savings     C) foreign exchange rates and tastes and preferences     D) imports and unemployment

17. Keynes believed that: A) Wages could be sticky    B) Economies gets stuck in undesirable equilibria     C) Government can make up for a shortfall in consumer and investment spending

3. All the above

18. Expansionary Fiscal policy means: A) Increasing government spending and raising taxes     B) lowering taxes and lowering government spending     C) lowering interest rates   D) none of the above are correct

19. The US will remain in recession until: A) spending substantially increases B) savings substantially increases  C) the stock market gains more than 10% in value  D) we balance our budget deficit

20. The Sasquatch, Bigfoot, and the Yeron are all possibly descendants of:

               A)  Gigantopithecus     B)  Plesiosaur     C) Pterodactyl     D) Gigliosaurus

Answer 1

Q-1 Answer :: (B)Above

=> Explanation ::

If actual GDP is below potential GDP, Then the unemployment rate is Below the natural rate. It Means Economy is Below Full Employment.

Q-2 Answer :: (D) Taxes And Government Spending

=> Explanation :

Fiscal Policy Affects The economy through If Government Increase spending It will Increase Demand Of Goods in Economy And If They Decrease Spending It Will Decrease demand In Economy. By taxes if Government Increase Taxes It will decrease Money Supply In Economy if government Decrease Taxes It Will Increase Money supply in Economy

Q-3 Answer :: (B) FOMC

=>Explanation ::

FOMC is Federal Open Market Committee. This Committee Is Responsible for Fed's Open Market Operation Which Is Most Important Instrument Of Monetary Policy.They Affect The Money supply By Using Monetary Policy Open Market Operation To Stabilize The Economy.

Q-4 Answer :: (A) Lower The Federal Funds Rates to Zero.

=> Explanation :: This Rate Affect Bank borrowing From other Bank So Decreasing Federal Funds Rates Means Back Borrow More Money From Other Banks It Leads to Lower interest Rate and More Money supply in The Economy and It Cause liquidity In The Economy So Demand Increased.