Whenever a price floor is imposed above equilibrium price, it is true that:
a. supply will increase due to a higher price and a surplus will result.
b. supply will increase due to a higher price until it just equals the quantity demanded.
c. demand will increase due to a higher price and a shortage will result.
d. quantity supplied will exceed the quantity demanded.
Question 2Why does a larger government budget deficit increase the magnitude of the crowding-out effect?
Question 3The sum of the coins and currencies in the bank's vault and its deposit in the Fed is called:
a. vault cash.
b. transaction deposits.
c. legal reserves.
d. required reserves.
e. loanable funds.
Question 4Whenever a price ceiling is imposed in a market,
a. quantity demanded exceeds quantity supplied and a surplus results.
b. quantity demanded exceeds quantity supplied and a shortage results.
c. quantity supplied exceeds quantity demanded and a surplus results.
d. it is necessary to know whether the ceiling is imposed above or below the equilibrium price in order to determine whether the quantity traded will be affected.
Question 5Why is the tax multiplier smaller than the government spending multiplier?
Question 6Which of the following actions of the Fed will increase money supply in the U.S. directly?
a. Purchase U.S. government bonds
b. Increase the federal funds rate
c. Increase the reserve requirement
d. Increase the discount rate
e. Ban sales of private mutual funds
Question 7Minimum wage laws have little or no effect in this segment.
a. Low-skilled Labor
b. Teenagers
c. Highly skilled workers
d. Unemployed workers
Question 8How does the multiplier work and what might government use it for?
Question 9Which of the following is true of the federal funds rate?
a. It is the interest rate that one bank charges another for overnight lending.
b. It is the interest rate that the Federal Reserve Bank charges commercial banks for borrowing money.
c. It is the interest rate you earn in your saving account.
d. It is the interest rate the bank charges business firms for borrowing money.
e. It is the interest rate that a domestic bank charges a foreign bank for borrowing money.
Question 10Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price. An increase in supply in both the wheat and gasoline markets will create:
a. surpluses in both the wheat and gasoline markets.
b. shortages in both the wheat and gasoline markets.
c. a surplus in the wheat market and an increase the quantity of gasoline traded.
d. a surplus in the wheat market and a shortage in the gasoline market.
Question 11If inflation is a major issue in the economy, what would be the correct fiscal policy response from an economic perspective? Why would members of Congress be unlikely to support such actions?
Question 12In order to use inflation targeting, a central bank must:
a. be independent of fiscal policy.
b. be dependent on fiscal policy.
c. focus on money supply.
d. focus on unemployment.
e. focus on stable exchange rates.
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