Name________________________
Unit Test #3
Macroeconomics
Matching: Each question worth 2 points.
___1. Low interest rates and ample money supply
___2. The study of the economy as a whole
___3. The Group Responsible for Buying and selling
government securities
___4. Period of recovery from a recession
___5. Use of persuasion by the Fed to control money supply
A. Macroeconomics
B. Standard of Living
C. Easy Money Policy
D. Moral Suasion
E. Federal Open Market
Operations
___6. Gov’ts attempt to stabilize the economy through taxes & spending F. Business Cycle
___7. Systematic ups and downs of real GDP
G. Gross Domestic Product
___8. Price changes for about 90,000 items
H. Expansion
___9. quality of life based on possession of necessities and luxuries
I. Fiscal Policy
___10. Dollar value of all final goods, services, and structures
J. Consumer Price Index
___11. When one company controls all products in a given market
K. Monopoly
___12. A form of Business structure where owners have no personal
L. Limited Liability Corp.
liability
______________________________________________________________________________
Multiple Choice: Choose the best answer for each of the following questions (2 points):
1.The basic policy-making body in the Federal Reserve is the:
a. Federal Open Market Committee
c. Federal Monetary Authority
b. Fed Board of Governors
d. Council of Economic Advisors
2. The dollar value of all final goods, services, and structures produced in one year with labor and property
supplied by United States residents is called ___________.
a. Gross National Product
c. Average National Product
b. Gross Labor Product
d. Average Labor Product
3.The Federal Reserve Banks are:
a. Considered to be bankers banks
b. Deal only with foreign banks
c. Deal only with non-profit banks
d. Publicly owned and privately managed
4.If the economy encountered a recession, monetary and fiscal policy would call for
a. Selling bonds, raising the reserve requirement, lowering the discount rate, increase taxes
b. Buying bonds, reducing the reserve requirement and discount rate, decrease taxes
c. Buying bonds, raising the reserve requirement and discount rate, increase taxes
d. Buying bonds, lowering the reserve requirement, raising the discount rate, decrease taxes
5. Money loses its value when it
a. Becomes too portable
b. Is divisible
c. Is durable
d. Becomes too plentiful
6. As a result of the financial institution crisis of the 1980’s, banks are now insured by the________________
7. One advantage of monetary policy over fiscal policy is__________________________________________
8. This agency was created by the federal government to supervise and regulate member banks so they serve the
public efficiently?____________________________________________________________
9. If Juan deposits $5000 into his savings account for one year at 5% interest what is his total amount at the end
of the year?:_______
10. Raising capital is when a business obtains funds to expand or develop new products
a. True
b. False
11. The Consumer Price Index reports on price changes for about 90,000 goods and services
a. True
b. False
12. Setting fiscal policy is a responsibility of The Federal Reserve:
a. True
b. False
13. Freedom from business income tax is main strength of the corporate form of business organization?
a. True
b. False
14. In a market economy, consumers decide what products and services will be offered?
a. True
b. False
15.Prosperity, Contraction, Depression, and Expansion are the four phases of the business cycle?
a. True
b. False
16. Credit Unions are an example of a deposit type financial institution.
a. True
b. False
17. In command economy the government makes all the decisions and answers the 3 basic economic
questions
a. True
b. False
18. The business cycle from WWII to 2000 has be characterized as uninterrupted expansion
a. True
b. False
19. Monopolies are illegal under anti-trust legislation:
a. True
b. False
Short Answer: Attempt every question – partial credit is awarded (4 points each)
1. What is the dependency ratio?
2. Why is the Federal Reserve independent from the Government?
3. What does CPI stand for, and what does it measure?
4. Define the two measurements of the money supply.
5. How do the issues of timing and burden impact the Fed’s monetary policy?
6. What is consumer confidence, and why is it important to the health of our economy?
7. List 3 responsibilities of the Fed.
8. What are 3 economic conditions the FOMC looks at when deciding monetary policy?
9. Explain why many banks failed during the great depression.
10. What are two goals of Monetary Policy?
11. Explain the difference between GNP and GDP.
12. Draw and label the parts of the business cycle.
13. Explain the difference between GDP and GNP.
14. Explain why many banks failed during the great depression.
15. List 3 explanations for the causes of inflation.
Essay Question: 20 points
1. The economy is in a recession, inflation is rising, and interest rates are high. What monetary role
should the Fed take? Why? Who determines monetary policy? (List members) What methods of
regulation (tools) might be used to increase or decrease the money supply?