Economics 2

The distribution of personal income in a pure market economy is based on

• income tax rates

• The level of education and skills
• The amount of wealth inherited
• The amount of property owned

• Income tax rates

Which of the following is an expansionary fiscal policy action?

• Increasing taxes
• Decreasing government spending
• Increasing government spending

• Decreasing taxes

Which of the following are in the M1 measure of the money supply?

• Currency in circulation, demand deposits, and other liquid assets

• Currency in circulation, time deposits, and other liquid assets
• Currency in circulation, demand deposits, and long-term bonds
• Currency in circulation, time deposits, and long-term bonds

Firms in imperfectly competitive markets engage in advertising to

• differentiate their products and increase demand

• Decrease their production costs
• Increase the price of their products
• Decrease competition

Which of the following actions by the Federal Reserve Bank will decrease the federal funds rate?

• Increasing the reserve requirement
• Purchasing bonds on the open market

• Selling government securities
• Buying government securities

The commercial banking system creates money when

• it grants a loan
• it collects taxes
• it prints more currency
• it increases interest rates

Which of the following illustrates the short-run impacts of an increase in government purchases on the price level and real output?

• It decreases the price level and increases real output
• • The aggregate demand curve shifts to the right, increasing the price level and real output.

• It decreases both the price level and real output
• It increases the price level and decreases real output

Which of the following is an example of frictional unemployment?

• Donte has completed his master’s degree and is looking into several job offers.

• A person who is unemployed due to a recession
• A person who is unemployed due to technological advancements
• A person who is unemployed due to a natural disaster

Which of the following describes the fundamental economic problem?

• The struggle between rich and poor
• The lack of technological progress
• The scarcity of resources relative to human wants
• The unequal distribution of wealth

Which of the following financial instruments is most likely to offer the lowest risk and highest return for a short-term investment?

• Stocks
• Cryptocurrency
• Real estate
• Certificate of deposit