PFLE: Unit 2 Review

The information in the chart is illustrating-

• the advantages and disadvantages of a mixed economy/socialism.

• the advantages and disadvantages of a command economy/Communism.

• the advantages and disadvantages of a market economy/Capitalism.

• the advantages and disadvantages of a traditional economy.

The struggle among sellers to attract consumers by offering the best products at the lowest prices is known as-

• profit motive.

• competition.

• voluntary exchange.

• property rights.

Ivan works for an automobile factory that exports cars around the world. The government manages the factory, and he lives in housing provided by the city. Ivan most likely lives in

• a closed economy with limited government regulation.

• a mixed market economy with some government regulation.

• a pure market economy with no government regulation.

• a command economy with heavy government regulation.

The United States Federal Reserve System was established to -

• solve the problems of the Great Depression.

• provide the nation a safer, flexible, and more stable monetary system.

• serve as a source of loans for farmers.

• balance the federal budget.

Which best describes a central bank's primary goals?

• limiting inflation and reducing unemployment

• managing credit and ensuring the money supply's liquidity

• controlling stagflation and reducing unemployment

• reducing unemployment and maintaining cash flow

The Federal Reserve manages the nation's currency and money supply by -

• overseeing bank collections and payments on loans.

• offering investment advice and adjusting interest rates.

• manipulating interest rates and acting as a lender to banks.

• dictating criteria and setting loan terms for banks.

Which of these regulates the amount that a member bank can loan to its customers?

• the discount rate.

• the quantity theory of money.

• the reserve requirement.

• the prime rate.

All of the following are the goals when a government uses expansionary monetary policy EXCEPT?

• decreasing its interest rates to increase investment spending

• increasing its money supply to boost the economy

• increasing its money supply to speed business expansion

• decreasing its money supply to slow the economy

__________________ monetary policy involves decreasing the money supply.

• Expansionary

• Unstable

• Fixed

• Contractionary

A newspaper headline states, "Federal Reserve Decides to Reduce the Money Supply; Slowing of the Economy Likely Impact."

According to the headline above, the Federal Reserve -

• thinks the unemployment rate is too high.

• hopes that consumers will decided to spend more to grow the economy.

• wants banks to reduce lending, leading to economic contraction.

• wants banks to give more customers loans.