Identify the choice that best completes the statement or answers the question.
1. Define economics.
a) a financial and social system
b) the study of a country’s overall economic issues
c) the integration between consumers, families, and businesses
d) the study of the choices that different entities make in allocating resources
2. Macroeconomics focuses on
a) the major issues facing the national economy, but has little or no relevance to individuals.
b) smaller economic units such as individual consumers, families, and individual businesses operating within the economy.
c) the major issues facing the national economy that may seem abstract, but directly affect an individual’s day-to-day life.
d) the role of government, while microeconomics focuses on the private sector.
3. After the collapse of the dot com bubble and the 9/11 terrorist attacks, the stock market depreciated and unemployment increased leading many to fear that the country was on the brink of a full-blown recession. In order to stimulate the economy the Federal Reserve Bank
a) lowered taxes in an effort to increase spending.
b) lowered interest rates from 6.5% to 1.25% in an effort to increase spending.
c) increased taxes in an effort to increase spending.
d) increased interest rates from 1.25% to 6.5% in an effort to increase spending.
4.Early in your first term as President of the United States you faced an economy in the beginnings of a recession. Which of the following would represent an example of a fiscal policy you might suggest to deal with this situation?
a) Ask Congress to cut total spending on social programs to avoid running a budget deficit.
b) Ask Congress to cut taxes in order to give consumers and businesses more income to spend and invest.
c) Order the Fed to raise the required reserve ratio.
d) Urge Congress to give the U.S. Treasury the authority to print more money.
5. The Great Recession resulted in nearly 8 million jobs lost in a 3-year period. Many of these lost jobs will
a) come back as the economy continues to change.
b) come back because the old skills are needed.
c) never come back.
d) never come back because people don’t want to do them.
6.Which choice refers to fiscal policy?
a) The Fed’s policy was announced today that the Federal Funds Rate will increase by 1.25%, thereby helping to curb inflation.
b) The President signed an executive order that mandated a tax rate increase of 10% on durable goods.
c) President Franklin Delano Roosevelt signed an executive order that required private citizens to surrender all gold and silver currency to the federal government in 1935, or face fines or imprisonment.