Unit 4 Review - Econ

The market value of a nation's output of final goods and services best defines which term?

• Gross Domestic Product (GDP)

• Consumer Price Index (CPI)

• Unemployment Rate

• Intermediate Goods

Which section of the business cycle is described by a decreasing GDP, unemployment, and lower consumer spending?

• Expansion

• Peak

• Contraction

• Trough

Nguyen receives a 3% increase in wages this year. The national inflation rate is 5%. Which of the following is happening to Nguyen?

• He has more money to spend and is able to purchase more goods and services.

• He has more money to spend, but is able to purchase fewer goods and services.

• He has less money to spend, but is able to purchase more goods and services.

• He has less money to spend, and is able to purchase fewer goods and services.

An increase in the average level of prices is called...

• Contraction

• Expansion

• GDP

• Inflation

The job of the Federal Reserve Bank is to...

• Regulate money supply within the economy.

• Set and monitor bank reserves.

• Supply the economy with paper money.

• All of the Above.

Which of the following monetary policy can the Fed take to promote business investment and household consumption? (There are multiple correct answers).

• Raise interest rates.

• Reduce interest rates.

• Raise the reserve requirements.

• Reduce the reserve requirements

When a bank is required to hold less money in its reserves, the bank can do what with its excess money?

• Create new loans.

• Donate to charity.

• Print new currecny.

• Raise the interest rate.

What happens to the money supply in the Economy when the Fed requires banks to hold more money in reserves?

• The money supply decreases.

• They money supply increases.

• The money supply remains the same.

• All of the Above

Which of the following functions must an object have for it to be considered money? (Select all that apply)

• It must have a store of value.

• It must have be a unit of account.

• It must be a medium of exchange.

• It must have a method of borrowing

The fact that the U.S. dollar is divisible into quarters, dimes, and nickels best represents its effectiveness in serving which important function of money?

• Store of Value

• Unit of Account

• Medium of Exchange