When the sale of a good is illegal, it is like setting a price ceiling at zero.
a. True
b. False
Indicate whether the statement is true or false
Question 2Many economists believe that tax cuts increase incentives to work and invest but current U.S. tax levels do not appear to be on the downward side of the Laffer curve.
a. True
b. False
Indicate whether the statement is true or false
Question 3The Gramm-Leach-Bliley Act (GLBA), passed by the U.S. Congress in the year 1999, allows commercial banks to:
a. operate in all foreign countries.
b. open new branches in Cuba.
c. expand their business into other areas of finance, including insurance and selling securities.
d. raise reserve requirements for other financial institutions.
e. eliminate unit banking.
Question 4A price floor set above the equilibrium price is binding.
a. True
b. False
Indicate whether the statement is true or false
Question 5Robert lost his job during the last recession and his yearly income fell by 15 percent. As a result of the action of automatic stabilizers, his disposable income would likely have fallen by less than 15 percent.
a. True
b. False
Indicate whether the statement is true or false
Question 6The Depository Institutions Deregulation and Monetary Control Act passed by the Congress in 1980 led to:
a. the complete removal of thrift institutions.
b. increased competition among financial institutions.
c. the formation of large number of savings and loan associations.
d. privatization of all financial institutions in the U.S.
e. the complete removal of credit unions.
Question 7To be binding, a price floor must be set below the equilibrium price.
a. True
b. False
Indicate whether the statement is true or false
Question 8The effect of a tax multiplier on aggregate demand is larger than that of the government spending multiplier.
a. True
b. False
Indicate whether the statement is true or false
Question 9The thrift institutions:
a. were nonprofit banking institutions.
b. were owned by the Federal Reserve.
c. historically offered only savings accounts, not checking accounts.
d. controlled the U.S. monetary policy prior to the establishment of the Federal Reserve.
e. were monitored by the Federal Deposit Insurance Corporation.
Question 10When demand decreases and supply increases, there will be a decrease in the equilibrium price.
a. True
b. False
Indicate whether the statement is true or false
Question 11If the MPC is 2/3, then 2/3 of the effect of an increase in government purchases on aggregate demand will come from increased consumption.
a. True
b. False
Indicate whether the statement is true or false
Question 12Which of the following is not true about a special drawing right (SDR)?
a. The SDR is a composite currency.
b. The value of the SDR is an average of the values of the currencies of major industrial countries.
c. The SDR was created in 1980 by the World Bank.
d. The SDR is an international reserve asset.
e. The SDR is used to settle international debts.
Question 13An increase in supply will cause a shortage at the original market price.
a. True
b. False
Indicate whether the statement is true or false
Question 14Contractionary fiscal policy may have a larger effect in reducing aggregate demand in an open economy than a closed economy.
a. True
b. False
Indicate whether the statement is true or false
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