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</p> Signup and view all the answers

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

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

    Who is the current chairperson of the Federal Reserve?

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

    How does lowering interest rates affect the demand for money?

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

    How do banks create money?

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

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

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

    Which one of these factors can shift the demand curve?

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

    Which one of these is true about a price floor?

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

    Who benefits from international trade?

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

    What is a tariff?

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

    What is a trade surplus?

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

    What is a trade deficit?

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

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

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

    Which of the following is a goal of fiscal policy?

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

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

    <p>Inflation</p> Signup and view all the answers

    Which of the following is true about the glass ceiling?

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

    Which of the following is a characteristic of discretionary spending?

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

    Who is the current chairperson of the Federal Reserve?

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

    How does lowering interest rates affect the demand for money?

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

    How do banks create money?

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

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

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

    What policies would the Fed use to fight inflation?

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

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

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

    What is the purpose of a tariff?

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

    What is the effect of increasing the money supply?

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

    What is the main argument in favor of protectionism?

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

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

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

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

    <p>Education</p> Signup and view all the answers

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

    <p>Monopsony</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</p> Signup and view all the answers

    What is a budget deficit?

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

    Which one of these is true about real GDP?

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

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