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Question 1 of 10
1. Question
When a price change produces only a small change in supply, the supply is said to be?
Correct
A supply curve is elastic when a price change leads to a great change in the quantity supplied; the curve is inelastic when a price change produces only a small change in supply.
Incorrect
A supply curve is elastic when a price change leads to a great change in the quantity supplied; the curve is inelastic when a price change produces only a small change in supply.
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Question 2 of 10
2. Question
Identify the factors that can cause the movement along the supply curve:
I. Changes in technology
II. Changes in resource prices
III. Natural disasters
IV. Changes in the price of substitute goodsCorrect
Factors that can cause movement along the supply curve include changes in resource prices, changes in technology, natural disasters, or other disruptive events.
Incorrect
Factors that can cause movement along the supply curve include changes in resource prices, changes in technology, natural disasters, or other disruptive events.
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Question 3 of 10
3. Question
What is the action taken by the government to affect the money circulating in the economy by increasing or decreasing the government spending and taxes?
Correct
Fiscal policy is the action taken by the government to influence the economy by raising or lowering government spending and taxes.
Incorrect
Fiscal policy is the action taken by the government to influence the economy by raising or lowering government spending and taxes.
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Question 4 of 10
4. Question
Which policy creates an increased GDP and higher price levels?
Correct
Usually, expansionary policy creates an increased gross domestic product and higher price levels. Conversely, the government may want to use restrictive fiscal policy in an effort to slow the economy. Restrictive fiscal policy generally consists of decreasing spending or increasing taxes, which usually causes the gross domestic product to decrease and price levels to drop.
Incorrect
Usually, expansionary policy creates an increased gross domestic product and higher price levels. Conversely, the government may want to use restrictive fiscal policy in an effort to slow the economy. Restrictive fiscal policy generally consists of decreasing spending or increasing taxes, which usually causes the gross domestic product to decrease and price levels to drop.
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Question 5 of 10
5. Question
Identify the tools used by Fed in creating monetary policy:
I. Adjusting the required reserve ratio
II. Open market operations
III. Manipulating the money supply by adjusting the discount rate
IV. Borrowing money from the governmentCorrect
The Fed has three tools at its disposal when creating monetary policy. The first is to adjust the required reserve ratio, which is the minimum amount that a bank is allowed to have in its reserves. When this ratio is lowered the money supply tends to increase. The Fed’s most powerful tool is its open market operations, in which it buys and sells government securities, depending on whether it wants to remove or add money to circulation. The Fed can also manipulate the money supply by adjusting the discount rate, the rate charged to member banks when they borrow money from the Fed.
Incorrect
The Fed has three tools at its disposal when creating monetary policy. The first is to adjust the required reserve ratio, which is the minimum amount that a bank is allowed to have in its reserves. When this ratio is lowered the money supply tends to increase. The Fed’s most powerful tool is its open market operations, in which it buys and sells government securities, depending on whether it wants to remove or add money to circulation. The Fed can also manipulate the money supply by adjusting the discount rate, the rate charged to member banks when they borrow money from the Fed.
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Question 6 of 10
6. Question
What does M-1 include?
I. Currency in circulation
II. Time deposits
III. Checkable deposits
IV. Traveler’s checksCorrect
M-1 is the simplest definition, and includes currency in circulation, checkable deposits, and traveler’s checks. M-2 is a bit broader; it includes everything in M-1 along with savings deposits, time deposits less than $100,000, and money market mutual fund shares.
Incorrect
M-1 is the simplest definition, and includes currency in circulation, checkable deposits, and traveler’s checks. M-2 is a bit broader; it includes everything in M-1 along with savings deposits, time deposits less than $100,000, and money market mutual fund shares.
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Question 7 of 10
7. Question
When money reduces from the system, what will be its effect on interest rates?
Correct
When money leaves the system, interest rates will rise, which will tend to drive down the value of stock (since the required rate of return will increase and the firm’s earnings will likely decrease).
Incorrect
When money leaves the system, interest rates will rise, which will tend to drive down the value of stock (since the required rate of return will increase and the firm’s earnings will likely decrease).
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Question 8 of 10
8. Question
What does M-2 include?
I. Saving deposits
II. Time deposits less that $100,000
III. Time deposits more than $100,000
IV. Currency in circulationCorrect
M-1 is the simplest definition, and includes currency in circulation, checkable deposits, and traveler’s checks. M-2 is a bit broader; it includes everything in M-1 along with savings deposits, time deposits less than $100,000, and money market mutual fund shares.
Incorrect
M-1 is the simplest definition, and includes currency in circulation, checkable deposits, and traveler’s checks. M-2 is a bit broader; it includes everything in M-1 along with savings deposits, time deposits less than $100,000, and money market mutual fund shares.
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Question 9 of 10
9. Question
Identify the leading economic indicators as compiled by National Bureau of Economic Research:
I. Stock prices
II. Average unemployment claims
III. Average employment earnings
IV. Average weekly work hoursCorrect
The ten leading economic indicators (as compiled by the National Bureau of Economic Research) are: stock prices; average weekly work hours; average unemployment claims; manufacturer’s new consumer goods orders; manufacturers’ new orders for nondefense capital goods; vendor performance; new building permits; the difference in interest rates for ten-year Treasury bonds and the federal funds rate); inflation-adjusted M-2; and consumer expectations as measured by the University of Michigan Research Center.
Incorrect
The ten leading economic indicators (as compiled by the National Bureau of Economic Research) are: stock prices; average weekly work hours; average unemployment claims; manufacturer’s new consumer goods orders; manufacturers’ new orders for nondefense capital goods; vendor performance; new building permits; the difference in interest rates for ten-year Treasury bonds and the federal funds rate); inflation-adjusted M-2; and consumer expectations as measured by the University of Michigan Research Center.
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Question 10 of 10
10. Question
What does CPI stand for?
Correct
The Consumer Price Index is calculated using statistics from the Bureau of Labor. This index, commonly known as the CPI, measures the cost of a basket of goods and services over a set time period. The Producer Price Index, known as the PPI, is calculated by the United States Department of Labor.
Incorrect
The Consumer Price Index is calculated using statistics from the Bureau of Labor. This index, commonly known as the CPI, measures the cost of a basket of goods and services over a set time period. The Producer Price Index, known as the PPI, is calculated by the United States Department of Labor.