If both market demand and supply increase simultaneously, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.
a. indeterminate; decrease
b. increase; increase
c. increase; indeterminate
d. decrease; decrease
Question 2Which of the following is true?
a. The fraction of their total disposable income that households spend on consumption is called the marginal propensity to consume.
b. As the real interest rate falls, additional projects with lower expected rates of return become profitable for firms, and the demand for investment curve shifts right.
c. Firms with excess inventories of finished goods have an increased incentive to invest in new capital to put those inventories to productive use.
d. None of the above is true.
Question 3Identify the correct statement.
a. District banks of the Fed hold reserves in the form of deposits at the Fed.
b. Commercial banks in each district make loans to the Fed.
c. The Fed sells U.S. government securities for the U.S. Treasury.
d. The district banks of the Fed print money and supply currency to the Fed.
e. The Fed holds the reserves of the commercial banks but it does not issues checks.
Question 4Ceteris paribus, if the market demand for a product increases, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.
a. increase; indeterminate
b. decrease; decrease
c. indeterminate; decrease
d. increase; increase
Question 5Will the national debt have to be paid off (i.e., reduced to zero) in the future?
a. No, it can continually be refinanced.
b. Yes, if it is not paid off, the U.S. Treasury will have to file for bankruptcy.
c. No, technically, it is not a contractual obligation of the federal government.
d. Yes, but since most of the debt is held by Federal Reserve Bank, its re-payment would merely involve an accounting transaction between the Fed and the Treasury.
Question 6Which of the following is a function of the Fed?
a. Printing foreign currency
b. Determining the level of government spending
c. Distributing welfare benefits
d. Administrating the Social Security fund
e. Ensuring that banks operate in a sound and prudent manner
Question 7Ceteris paribus, if the market supply of a product decreases, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.
a. increase; increase
b. decrease; increase
c. decrease; indeterminate
d. increase; decrease
Question 8Which group or groups buy U.S. public debt?
a. Government agencies
b. Private individuals
c. Private institutions
d. All of the above.
Question 9The President of which of the following district banks of the Fed is perpetually present on the Federal Open Market Committee?
a. The New York Fed
b. The Seattle Fed
c. The Boston Fed
d. The Chicago Fed
e. The Atlanta Fed
Question 10Ceteris paribus, if the market supply of a product increases, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.
a. increase; decrease
b. decrease; increase
c. increase; increase
d. decrease; indeterminate
Question 11The federal government funds deficit spending by:
a. issuing bonds.
b. redeeming bonds.
c. increasing taxes.
d. providing and selling government services.
Question 12The Federal Open Market Committee consists of:
a. the 12-member Board of Governors.
b. seven members of the Board of Governors and five district presidents.
c. the president of the New York district bank and the members of the Council of Economic Advisers.
d. the chairman of the Board of Governors and five district presidents.
e. seven members of the Board of Governors and a nine-member board of directors of the district banks.
Question 13If both the supply and demand for computer games increase, then the equilibrium price of the games:
a. is indeterminate and the equilibrium quantity rises.
b. is indeterminate and the equilibrium quantity falls.
c. falls and the equilibrium quantity also falls.
d. falls and the change in equilibrium quantity is indeterminate.