Weeks 8/9 Quiz Econ

In the Circular Flow Model, households provide which of the following to businesses?

• Taxes

• Goods and services

• Factors of production

• Government spending

National income is the total amount of money earned by:

• The government from taxes

• Individuals and businesses within a country

• Households in the private sector

• Foreign investors in the domestic market

Disposable income is best defined as:

• Income before taxes are deducted

• Income available for spending and saving after taxes

• Total revenue of a business

• The amount of money businesses invest in capital goods

Inflation occurs when:

• The overall price level in an economy decreases

• The purchasing power of money increases

• There is a sustained rise in the general price level of goods and services

• The supply of goods exceeds demand

Which of the following would be an example of disinflation?

• The inflation rate decreasing from 5% to 2%

• Prices dropping significantly across the economy

• Wages increasing faster than the cost of living

• A rapid increase in the money supply

Deflation is a decrease in the general price level, Disinflation is the slowing of inflation (ex:8% to 4% Inflation Rate), Inflation is a sustained increase in the general Price level.

When inflation is too high, what is more desirable Deflation or Disinflation?

• Disinflation - because Deflation causes a decrease in Price levels means a halt in income fore companies, leading to mass layoffs, and crashing GDP

• Deflation because when prices are too high it is good when they drop

• Inflation is always good because it means the economy is growing and there is more economic health

• Both are good for the general public when inflation is too high

What does the Consumer Price Index (CPI) measure?

• The amount of money banks lend to businesses

• The average change over time in the prices paid by consumers for a market basket of goods and services

• The income levels of households in an economy

• The amount of taxes collected by the government

The Federal Reserve System is responsible for:

• Setting income tax rates

• Controlling the money supply, setting the federal funds rate, and regulating banks

• Managing government spending and taxation policies

• Determining wage rates for workers

If the Federal Reserve raises interest rates, what is the likely impact on borrowing and spending?

• Borrowing increases and spending rises

• Borrowing decreases and spending slows

• Businesses expand and hire more workers

• Inflation immediately rises

Human capital refers to:

• The physical machinery used in production

• The skills, knowledge, and experience possessed by workers

• The amount of money a company has invested in stocks

• The total value of land and natural resources in an economy