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ECON 500 UMT Economics Practice Quiz Questions

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Economics

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University of management and technology Course: ECON500
Quiz 2000
1. Spending on programs that Congress authorizes ________ is known as discretionary
spending. Answer: b. on an annual basis
2. Huge increases in government spending and record low levels of unemployment during
the Vietnam War era in the late 1960s led policy makers to fear that Answer: b. the
economy was growing too fast, which would increase inflation.
3. Expansionary policies are policies designed to Answer: a. increase the level of real
GDP.
4. Contractionary policies are policies designed to Answer: b. reduce the level of real
GDP.
5. The Laffer curve illustrates that Answer: a. high tax rates could lead to lower tax
revenues if economic activity is severely discouraged.
6. Stabilization policies are policies designed to Answer: a. keep output constant.
7. According to this Application, which of the following is NOT a strategy that the
government can pursue to address the rising cost of federal retirement and health care
programs? Answer: c. borrow from the public to finance the programs
8. Contractionary policies are government policies that Answer: c. decrease aggregate
demand.
9. What are the two tools of fiscal policy that governments can use to stabilize an economy?
Answer: b. government spending and taxation
10. Taxes can have an important effect on Answer: d. all of the above.

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11. According to this Application, one strategy proposed to deal with the rising expenses of
government entitlement programs is for the government to save and invest now so as to
reduce the burden on future generations. This strategy would Answer: a. increase GDP,
and entitlement programs would increase along with GDP.
12. Tax cuts aimed at businesses can stimulate Answer: c. investment spending.
13. The stored value of money over time should not change significantly as long as the level
of inflation is Answer: a. high.
14. When checks are exchanged between banks, the Fed oversees the banks to ensure the
appropriate funds have been transferred. This is known as Answer: b. check clearing.
15. Economists use different definitions of money because Answer: d. it is not always clear
which assets are used primarily as money.
16. The group responsible for deciding on monetary policy is the Answer: a. Federal Open
Market Committee.
17. Which of the following is NOT included in M1 or M2? Answer: d. credit card balances
18. Studies by economists have tended to show that countries with more independent central
banks have Answer: b. less inflation.
19. A reason that economists keep an eye on both M2 and M1 is because Answer: c. money
market accounts are sometimes used like checking accounts and sometimes like
savings accounts.
20. When money is used to express the value of goods and services, it is functioning as a
Answer: c. unit of account.
21. If the banking system has a required reserve ratio of 25 percent, then the money
multiplier is Answer: b. 4.

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1 University of management and technology Course: ECON500 Quiz 2000 1. Spending on programs that Congress authorizes ________ is known as discretionary spending. Answer: b. on an annual basis 2. Huge increases in government spending and record low levels of unemployment during the Vietnam War era in the late 1960s led policy makers to fear that Answer: b. the economy was growing too fast, which would increase inflation. 3. Expansionary policies are policies designed to Answer: a. increase the level of real GDP. 4. Contractionary policies are policies designed to Answer: b. reduce the level of real GDP. 5. The Laffer curve illustrates that Answer: a. high tax rates could lead to lower tax revenues if economic activity is severely discouraged. 6. Stabilization policies are policies designed to Answer: a. keep output constant. 7. According to this Application, which of the following is NOT a strategy that the government can pursue to address the rising cost of federal retirement and health care programs? Answer: c. borrow from the public to finance the programs 8. Contractionary policies are government policies that Answer: c. decrease aggregate demand. 9. What are the two tools of fiscal policy that governments can use to stabilize an economy? Answer: b. government spending and taxation 10. Taxes can have an important effect on Answer: d. all of the above. 2 11. According to this Application, one strategy proposed to deal with the rising expenses of government entitlement pro ...
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