Which of the following is a characteristic of capitalism?
a. Government ownership of all capital.
b. Government decision-making is preferred to decentralized decision-making.
c. Market determination of prices and quantity.
d. Equality of income.
QUESTION 2If the multiplier is 3, equilibrium real GDP is 1,000 billion, and investment is 400 billion, what will happen if investment decreases to 380 billion? Real GDP will:
a. increase to 1,020 billion.
b. increase to 1,060 billion.
c. decrease to 980 billion.
d. decrease to 940 billion.
e. decrease to 970 billion.
QUESTION 3With respect to controlling the money supply, the law requires the Fed to take orders from:
a. the President.
b. the Speaker of the House.
c. the Secretary of the Treasury.
d. no onethe Fed is an independent agency.
QUESTION 4Which of the following statements is true?
a. The doctrine of laissez-faire advocates an economic system with extensive government intervention and little individual decision-making.
b. In capitalism income is distributed on the basis of need.
c. Adam Smith was the father of socialism.
d. Most real-world economies are mixed economic systems.
e. The invisible hand refers to government economic control.
QUESTION 5If the multiplier is 4, equilibrium real GDP is 600 billion, and investment is 25 billion, what will happen if investment increases to 30 billion? Real GDP will:
a. increase to 605 billion
b. decrease to 595 billion
c. increase to 620 billion
d. increase to 624 billion
e. decrease to 580 billion
QUESTION 6Which of the following types of financial institutions is required to belong to the Federal Reserve System?
a. National banks.
b. State-chartered banks.
c. Savings and loan institutions.
d. Credit unions.
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