M2 Practice FE ECON 2301

What is economics?

• how businesses make a profit

• how society uses its scarce resources to satisfy unlimited desires

• ability to manage money

• how the government controls the economy

Why did President Nixon remove the American dollar from the gold standard?

• prevent foreign nations from overburdening the US $ system by redeeming their dollars for gold

• U.S. wanted to replace the gold standard with silver

• Oil Crisis of 1973

• Wanted to lower unemployed by increasing inflation

Why do you trust the government when it comes to fiat money?

• fiat $ has no intrinsic or fixed value and is not backed by any tangible asset, such as gold or silver but declared legal tender by the government

• money is backed by the gold standard

• fixed current exchange rates

• Bretton Woods 1944 Agreement

Subprime mortgages are more likely to have fixed rates than standard mortgages

• True

• False

Which of the following is not a productive resource?

• a tractor

• a farmer

• a piece of land

• a financial loan $300

When economists use statistical analysis of data to understand the economy, what is it called?

• empirical economics

• probability

• parametric economics

• econometrics

An asset that can be easily converted to cash and that has a fixed nominal value is said to be liquid.

• True

• False

A bank's net worth is total assets minus its total liabilities.

• True

• False

A basic rule of accounting is expressed by the equation: Assets = Liabilities + Net Worth.

• True

• False

If a bank has assets of $8 billion and liabilities of $5 billion, its net worth is $3 billion.

• True

• False