Government Final Exam Study Guide

What does it mean when the Fed “tightens the money supply”?

• refuse to lend money to anyone.
• place their money in tightly locked vaults.
• refuse loans to anyone but the government.
• place more of their money in reserve and have less in circulation

What is a budget deficit?

• A deficit occurs when the federal government's spending exceeds its revenues
• A deficit occurs when the federal government's spending is lower than its revenues
• A deficit occurs when the federal government's spending equals its revenues

Using the chart, what is true about the revenues in the decade of the 1950’s?

• Between 1950-1960 the government had overall a deficit budget.

• Between 1950-1960 the government had overall a surplus budget.

• Between 1950-1960 the government had overall a balanced budget.

• Between 1950-1960 the government had formed a balanced budget and has lived off of a deficit ever since.

What is the federal government’s largest source of income?

• payroll tax
• excise taxes
• corporate profits tax
• individual income tax

What is a proportional tax?

• A tax that takes the same percentage of income from all income groups.
• A tax that takes a larger percentage of income from low-income groups than from high-incom groups.
• A tax that takes a larger percentage of income from high-income groups than from low-income groups.
• A tax that government imposes on income businesses and individuals within their jurisdiction generate.

Your school has announced a vacation. You finally get a chance to go for the holidays for the next month. But suddenly you came to know that training is scheduled for your favorite sports which you do not want to miss. So, if you go on vacation, then your opportunity cost will be what?

• Training for your sport.
• Going on vacation.
• Staying at school.
• Not going to training or vacation.

Will demand increase, decrease, or stay the same if there is a decrease in the price of a product?

• decrease
• increase
• remain the same

What kind of economy is organized by a centralized government that owns most, if not all, businesses and where government officials direct all the factors of production?

• traditional economy
• market economy
• command economy
• mixed economy

What is a price ceiling?

• The highest point at which goods and services can be sold.
• The lowest point at which goods and services can be sold.
• The point at which the price at which supply and demand are at equilibrium.
• The highest price that anyone has ever paid for a product.

The circular flow model is an exchange between what two entities?

• business and households
• households and consumers
• producers and households
• businesses and producers