Economics Quiz

Suppose that Crider State Bank has total deposits are $1.2 million and the required reserve ratio is 10%. What is the minimum amount of reserves that Crider State Bank must hold and what is the maximum amount the money supply will grow because of these deposits?

• $120,000 and $1,080,000

• $120,000 and $10,800,000

• $100,000 and $12,000,000

• $800,000 and $11,200,000

• $1,000,000 and $11,000,000

The numbers or the movement of the data on the business cycle reflect changes in the

• GNP.

• CPI.

• NASDAQ.

• GDP.

Why would the U.S. Federal Reserve Chairman contend that changes in monetary policy may have less of a positive impact than would fiscal policy changes on individuals and small businesses?

• Fiscal policy may focus more immediate efforts in the way of tax breaks or spending stimulus programs for individuals and small businesses.

• Monetary policy is used only by the Federal Reserve during times of positive economic growth.

• Monetary policy never has an effect on individuals or small businesses, but instead only deals with the supply of money.

• Monetary policy changes require direct action by Congress, so any alterations in policy are slow and partisan-based.

What is NOT affected by decisions of the Federal Open Market Committee?

• stock prices

• reserve requirements

• interest rates

• bond prices

Because of a global pandemic, a nation cuts its interest rates in an effort to stimulate its economy. What is the likely effect of this interest rate cut on the value of the nation's currency?

• The decrease in interest rates will likely discourage foreign investment in the nation's currency and lead to an appreciation.

• The decrease in interest rates will likely encourage foreign investment in the nation's currency and lead to an appreciation.

• The decrease in interest rates will likely discourage foreign investment in the nation's currency and lead to a devaluation.

• The decrease in interest rates will likely encourage foreign investment in the nation's currency and lead to a devaluation.

This illustrates that one function of money is to be a ________.

• measure of value.

• medium of exchange.

• bartered item.

• store of value.

If a contractionary fiscal policy is followed by an expansionary monetary policy, nominal interest rate and unemployment would immediately most likely be affected in what ways?

The difference between nominal GDP and real GDP is

• that nominal GDP uses exports and real GDP uses net exports.

• that nominal GDP included the depreciation of assets and real GDP uses the appreciation of capital.

• the prices used in the calculations.

• the taxes used within the calculations.

Suppose the Federal Reserve buys $300 billion worth of government securities from the public. If the required reserve ratio is 20%, the maximum increase in the money supply is ___.

• $600 billion

• $2,000 billion

• $3,000 billion

• $1,500 billion

How has globalization impacted the United States business cycle?

• It has deflated economic growth causing the US economy to experience a recession.

• It has caused prices to rise creating a period of economic decline.

• It has destabilized the US domestic markets.

• It has synchronized the the US business cycle with the rest of the world.