Fall Economics Exam Part 1 Questions 1-25

1. Based on the information in the table, which economic condition is characteristic of all three nations?

• a. Low GDP per capita

• b. High levels of inflation

• c. Low inflationary levels

• d. High levels of unemployment

2. Commodity money can best be described as--

• a) Trade goods or services between two people without the exchange of money

• b) currency that a govt. has declared to be legal tender, despite not being backed by reserves

• c) a form of money which has an intrinsic value, worth something in its own right rather than being a token of financial value

• d) money that consists of a token or certificate that can be exchanged for a specific good, like gold, silver, or even water, oil or food

3. During an economic recession the Federal Reserve Banks will most likely react by--

• a) easing monetary policy making it easier to lend money

• b) raising the discount rate to affect the monetary supply

• c) Tightening monetary policy making lending more difficult

• d) reducing open market transactions to reduce the money supply

4. Money that has value simply because the government says it does is called--

• a) Credit

• b) Currency

• c) Fiat money

• d) Representative Money

5. What is one way the U.S. economy can be adversely affected when interest rates are lowered?

• a) Prices may inflate

• b) Tax rates may decrease

• c) Less capital may be available

• d) Unemployment may increase

6. 6. The most effective way to manage credit card debr is by--

• a) Paying the minimum balance

• b) Paying off the balance each month

• c) Working a part-time job to pay for your credit cards

• d) Finding a credit card with the lowest interest rate

7. Which scenario is most likely to result when the Federal Reserve raises the reserve requirment?

• a) More money is required to be kept in banks to loan out to businesses so they can invest in their companies

• b) More money is required to be kept in bank reserves, and less is available to be loaned out to businesses to invest in the economy

• c) More money is required to be kept in the Federal Reserve banks to make it available for loans to member banks in poor economic times

• d) More money is required to be kept in the Federal Reserve Banks, which increases the amount of money in circulation and stimulates the economy

8. Which of the following accurately completes the graphic?

• a) Types of money

• b) Federal reserve notes

• c) Characteristics of money

• d) Functions of money

9. One of the primary functions of financial institutions in an economy is to--

• a) Offer incentives to businesses for investing

• b) Prepare taxes for individuals and businesses

• c) Create investment portfolios for venture capitalists

• d) Provide access to capital for people and businesses

10. Which type of bank account is not insured?

• a) Checking accounts

• b) Savings accounts

• c) Mutual Fund

• d) Money Market accounts