Interest and the Economy

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Questions and Answers

Who is responsible for controlling the money supply and regulating banks in the United States?

  • The Securities and Exchange Commission
  • The Department of Commerce
  • The Treasury Department
  • The Federal Reserve (correct)

What is the term used to describe the situation when a country's exports exceed its imports?

  • Trade deficit
  • Current account surplus
  • Trade surplus (correct)
  • Balance of trade

What is the main goal of expansionary fiscal policies?

  • To stabilize prices and reduce unemployment
  • To increase spending and stimulate economic growth (correct)
  • To decrease the budget deficit and promote saving
  • To decrease taxes and reduce government spending

What is the term used to describe an increase in the overall price level?

<p>Inflation (D)</p> Signup and view all the answers

Which one of these is the most important job of the Federal Reserve?

<p>Creating monetary policy (D)</p> Signup and view all the answers

Who is the current chairperson of the Federal Reserve?

<p>Jerome Powell (B)</p> Signup and view all the answers

How does lowering interest rates affect the demand for money?

<p>Increases the demand for money (D)</p> Signup and view all the answers

How do banks create money?

<p>By lending out more money than they have in reserves (C)</p> Signup and view all the answers

Which one of these is true about the law of demand?

<p>As price decreases, quantity demanded increases (D)</p> Signup and view all the answers

Which one of these is an example of an elastic demand?

<p>Demand for gasoline (D)</p> Signup and view all the answers

Which one of these factors can shift the demand curve?

<p>Prices of related goods (B)</p> Signup and view all the answers

Which one of these is true about a price floor?

<p>It sets a minimum price (A)</p> Signup and view all the answers

Who benefits from international trade?

<p>All participating countries (A)</p> Signup and view all the answers

What is a tariff?

<p>A tax on imported goods (D)</p> Signup and view all the answers

Define protectionism. What is the argument in favor of protectionism?

<p>An economic policy to shield domestic industries from foreign competition (C)</p> Signup and view all the answers

What is a trade surplus?

<p>When a country exports more goods than it imports (C)</p> Signup and view all the answers

What is a trade deficit?

<p>When a country imports more goods and services than it exports (B)</p> Signup and view all the answers

What was the purpose of NAFTA?

<p>To eliminate or reduce trade barriers and promote economic cooperation among the United States, Canada, and Mexico (A)</p> Signup and view all the answers

What is economics?

<p>The study of how individuals and societies make choices about the use of scarce resources (C)</p> Signup and view all the answers

What is the Law of Demand?

<p>When the price of a good or service increases, the quantity demanded decreases, and vice versa (C)</p> Signup and view all the answers

Which of the following is an example of mandatory spending in the United States?

<p>Social Security (A)</p> Signup and view all the answers

Which of the following is a goal of fiscal policy?

<p>Low unemployment (A)</p> Signup and view all the answers

What is the term used to describe an increase in the overall price level?

<p>Inflation (B)</p> Signup and view all the answers

Which of the following is true about the glass ceiling?

<p>It only affects certain groups (D)</p> Signup and view all the answers

Which of the following is a characteristic of a progressive tax system?

<p>Tax rates increase with income (C)</p> Signup and view all the answers

Which of the following is a characteristic of discretionary spending?

<p>It includes defense (B)</p> Signup and view all the answers

Which one of these is the most important job of the Federal Reserve?

<p>Managing the money supply (A)</p> Signup and view all the answers

Who is the current chairperson of the Federal Reserve?

<p>Jerome Powell (A)</p> Signup and view all the answers

How does lowering interest rates affect the demand for money?

<p>Increases the demand for money (B)</p> Signup and view all the answers

How do banks create money?

<p>By lending out deposits (A)</p> Signup and view all the answers

What is the Fed's most important monetary policy tool?

<p>Open market operations (C)</p> Signup and view all the answers

What policies would the Fed use to fight inflation?

<p>Contractionary monetary policies (D)</p> Signup and view all the answers

According to comparative advantage, which country should focus on producing computers?

<p>Country A (A)</p> Signup and view all the answers

What is the purpose of a tariff?

<p>To make foreign goods more expensive (D)</p> Signup and view all the answers

What is the effect of increasing the money supply?

<p>Lowering interest rates (A)</p> Signup and view all the answers

How can individuals avoid losing value on their savings due to inflation?

<p>Invest in assets with better interest rates (B)</p> Signup and view all the answers

What is the main argument in favor of protectionism?

<p>To protect domestic jobs and industries (B)</p> Signup and view all the answers

What is the definition of interest?

<p>The cost of borrowing money or the return earned on an investment (D)</p> Signup and view all the answers

Which of the following is not one of the three key economic questions?

<p>When to produce? (D)</p> Signup and view all the answers

Which of the following is an example of a positive externality?

<p>Education (A)</p> Signup and view all the answers

Which of the following is not one of the four primary market structures?

<p>Monopsony (D)</p> Signup and view all the answers

What is the Consumer Price Index (CPI)?

<p>A measure of the average price level of goods and services in an economy (A)</p> Signup and view all the answers

What is a budget deficit?

<p>When government spending exceeds government revenue in a given period (A)</p> Signup and view all the answers

What is monetary policy?

<p>The use of interest rates and the money supply to influence the economy (A)</p> Signup and view all the answers

Which one of these is true about a price ceiling?

<p>It sets a maximum price that can be charged for a good or service. (D)</p> Signup and view all the answers

Which one of these is true about a subsidy?

<p>It is a payment from the government to encourage production. (C)</p> Signup and view all the answers

Which one of these is true about a natural monopoly?

<p>It occurs when only one firm can efficiently provide a good or service. (A)</p> Signup and view all the answers

Which one of these is true about the elasticity of supply?

<p>It is affected by production costs. (D)</p> Signup and view all the answers

Which one of these is true about a trade deficit?

<p>It occurs when a country's imports exceed its exports. (A)</p> Signup and view all the answers

Which one of these is true about real GDP?

<p>It accounts for inflation. (C)</p> Signup and view all the answers

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