ECONOMICS

Question 1 (Multiple Choice Worth 5 points)

This image is a graph with, price, labeling the y axis and, quantity, labeling the x axis. Two curves intersect on the graph, one upward sloping and the other downward sloping. Two horizontal axes are highlighted, one above the intersection point of the curves with the label, A, and one below the intersection point of the curves with the label,B.

In the diagram above, what will happen if the government sets the minimum wage at Point B?

There will be a shortage of workers.
There will be a surplus of workers.
The minimum wage will rise to meet equilibrium.
The minimum wage will fall to meet equilibrium.

Question 2 (Multiple Choice Worth 5 points)

This image is a graph with, price, labeling the y axis and, quantity, labeling the x axis. Two curves intersect on the graph, one upward sloping and the other downward sloping. Two horizontal axes are highlighted, one above the intersection point of the curves with the label, A, and one below the intersection point of the curves with the label, B.

Use this image to answer the following question. When government sets a price for a good below equilibrium, there will be

economic growth
economic loss
a shortage
a surplus

Question 3 (Multiple Choice Worth 5 points)

When a government spends more money in one year than it collects in taxes, there is a budget

debt
deficit
surplus
reversal

Question 4 (Multiple Choice Worth 5 points)

Which of these could result from decreased federal spending?

Advances in the space program
Fewer social programs
Increased national debt
More government regulation

Question 5 (Multiple Choice Worth 5 points)

This image is a graph with, time, along the x axis and, real GDP, along the y axis. A horizontal wavy line extends across the graph. The highest point on the line has a label, B. The downward slope has a label, A.The lowest point on the line has a label, C. The upward slope has a label, D.

Use this image to answer the following question. When the economy is operating at point B, the U.S. Congress is most likely to follow

expansionary fiscal policy
contractionary fiscal policy
expansionary monetary policy
contractionary monetary policy

Question 6 (Multiple Choice Worth 5 points)

Buying securities in open market operations may promote economic growth because

the U.S. Congress guarantees the value of government securities
the U.S. Congress allows the securities to be used for business expansion
this action increases banks’ cash, allowing for more loans and investment
this action decreases banks’ cash, preventing risky investment behavior

Question 7 (Multiple Choice Worth 5 points)

How does the president most directly influence the Federal Reserve System?

By participating in the Federal Open Market Committee
By setting national monetary policy
Through appointments to the Board of Governors
Through leadership of Federal Reserve Banks

Question 8 (Multiple Choice Worth 5 points)

How does the U.S. government slow economic growth?

By decreasing taxes and decreasing spending
By decreasing taxes and increasing spending
By increasing taxes and decreasing spending
By increasing taxes and increasing spending

Question 9 (Multiple Choice Worth 5 points)

A supply and demand graph, showing quantity on the x axis from 0 to 60 in 10 unit increments. Price is on y axis from 0 to 5 in 1 unit increments. Supply line rises up and to the right from 10, 1 in positive x and y directions. An arrow points to the equilibrium at P, Q, the convergence of supply and demand lines. The area above both the supply and demand curves is marked Surplus. The area under both the supply and demand curves is marked Shortage
Public Domain

The government sets the price of wheat for the coming year above the equilibrium price. What effect would this have on supply and demand?

The amount of wheat produced and demanded will drop the next year.
The amount of wheat produced and demanded will rise the next year.
There will be more wheat produced than demand requires.
There will not be enough wheat produced to keep up with demand.

Question 10 (Multiple Choice Worth 5 points)

A supply and demand graph, showing quantity on the x axis and price is on y axis. Supply line rises up and to the right from 0, 0 in positive x and y directions. Demand line descends from x axis origin and upper range of y axis in positive x, negative y direction. An arrow points to the equilibrium, the intersection of supply and demand lines. The area above both the ascending and descending lines is marked A. The area to the right of both the ascending and descending lines is marked B. The area below both the ascending and descending lines is marked C. The area to the left of both the ascending and descending lines is marked D.

From an Associated Press article on Venezuela dated January 22, 2008:
“… troops are cracking down on the smuggling of food … the National Guard has seized about 750 tons of food … [President] Hugo Chàvez ordered the military to keep people from smuggling scarce items like milk … He’s also threatened to seize farms and milk plants …”

These actions were the result of a price ceiling on food. Which zone (represented by a letter) on the graph reflects this policy, and what does it create?

Letter A; supply exceeds demand, resulting in a surplus
Letter B; supply exceeds demand, resulting in a shortage
Letter C; demand exceeds supply, resulting in a shortage
Letter D; demand exceeds supply, resulting in a surplus

Question 11 (Multiple Choice Worth 5 points)

Credit unions and other depository institutions differ from member banks of the Federal Reserve mainly in that they

are exempt from federal oversight
are not subject to regulation
do not have stock in Federal Reserve Banks
serve a nationwide consumer base

Question 12 (Multiple Choice Worth 5 points)

How are national debt and deficit related?

A deficit is the money the government owes the states.
A deficit is the sum of national debts.
The national debt is an accumulation of deficits.
The national debt is the sum of state deficits.

Question 13 (Multiple Choice Worth 5 points)

Who may regulate a natural monopoly?

Consumers
Corporations
Government
Suppliers

Question 14 (Multiple Choice Worth 5 points

Which is an example of the deregulation of a government-regulated natural monopoly?

A new law allows consumers to choose between electricity providers.
A new law funds an off-shore wind-power initiative.
A new law regulates the number of service interruptions a utility can have.
A new law requires underground wires in all high-wind areas.

Question 15 (Multiple Choice Worth 5 points)

Which describes a benefit from government regulation of a natural monopoly?

After flooding destroys homes in a small town, rent goes up.
Livy’s gas utility bill does not go up during a natural gas shortage.
The corn syrup in Marcus’s candy was cheaper to use than sugar.
Two lumber suppliers compete to offer the best price for paper mills.

Question 16 (Multiple Choice Worth 5 points)

Which of the following circumstances usually comes before a period of economic contraction?

Decreasing inflation
High unemployment
Low GDP
Peak production

Question 17 (Multiple Choice Worth 5 point

The country of Lilliput has low unemployment and high consumer spending, and small businesses are thriving. However, prices are starting to rise throughout the economy. What should Lilliput’s government do to prevent inflation from happening?

Lower the income tax, which gives citizens less money to spend, and buy services from civilian-owned businesses, which creates more jobs.
Lower the income tax, which gives citizens more money to spend, and buy more services from civilian-owned businesses, which creates more jobs.
Raise the income tax, which gives citizens less money to spend, and stop buying services from civilian-owned businesses, which eliminates jobs.
Raise the income tax, which gives citizens less money to spend, and buy more services from civilian-owned businesses, which creates more jobs.

Question 18 (Multiple Choice Worth 5 points)

The Federal Reserve includes twelve

governing bodies
regional banks
member offices
city officials

Question 19 (Multiple Choice Worth 5 points)

The inflation rate is decreasing and unemployment is rising. The economy is likely in

contraction
expansion
a peak
a trough

Question 20 (Essay Worth 5 points)

Inflation is skyrocketing, and prices are out of control. What are banks most likely to ask the Federal Reserve to do with regards to government bonds and reserve requirements? Be sure to explain why

 

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