WorksheetsUnit 3 Econ. Macroeconomics
Total questions: 17
Worksheet time: 9mins
How might reducing taxes on middle- and lower-income citizens help stimulate the economy?
It will lower the price of goods and services, enabling people to spend more money.
It will allow people to save more money, providing a safety net when times are hard.
It will give people more money to spend, increasing the overall demand for goods and services.
It will lower the cost to make goods and provide services, enabling businesses to hire more workers.
What does the Federal Reserve indicate to financial institutions when it raises or lowers the discount rate?
whether to increase or decrease the amount of cash kept on hand
Student(s) may have incorrectly believed that the discount rate is related to the amount of cash financial institutions are required to have on hand rather than the interest rate charged on money that financial institutions borrow from the Federal Reserve. This answer choice is more closely associated with the reserve requirement.
whether to raise or lower the amount of interest paid on customer deposits
Student(s) may have incorrectly believed that the discount rate is related to the amount of interest financial institutions pay on customer deposits rather than the interest rate charged on money that financial institutions borrow from the Federal Reserve. The Federal Reserve does not regulate financial institutions in this way.
whether to raise or lower the fees charged to open an account
Student(s) may have incorrectly believed that the discount rate was related to the cost of opening an account at a financial institution rather than the interest rate charged on money that financial institutions borrow from the Federal Reserve. The Federal Reserve does not regulate financial institutions in this way.
whether to increase or decrease their lending activity
The discount rate is the interest rate charged on money that financial institutions borrow from the Federal Reserve. By adjusting the discount rate, the Federal Reserve sends a signal to financial institutions to either increase or decrease their lending activity.
Read the text and answer the question.
Peak Oil, Inc. operates an oil refinery in Washington state. In 2018, the company imported $1 billion worth of crude oil from Canada. Out of that crude oil, the company produced $1.5 billion worth of gasoline and $1.5 billion worth of fuel oil. Peak Oil exported and sold all of the gasoline it produced in Canada and it sold all of the fuel oil domestically. The company did not produce or import any other products.
Under the output expenditure model of determining gross domestic product, what value did Peak Oil contribute to the United States’ net exports in 2018?
$0.5 billion
Peak Oil exported $1.5 billion worth of goods and imported $1 billion worth of goods. Therefore, its impact on the United States’ net exports was $0.5 billion.
$1.5 billion
The total value of Peak Oil's exports was $1.5 billion, but the value of its imports must be subtracted from that value to determine the company’s impact on the United States’ net exports
$2 billion
The value of Peak Oil’s impact on the United States’ net exports would be $2 billion if the company had exported and sold the fuel oil it produced outside of the United States instead of selling the fuel oil domestically.
Along with government spending, what three factors make up gross domestic product (GDP) under the expenditure approach for calculating GDP?
tax revenue
investment
household income
consumer spending
net exports
In terms of the business cycle, what is a recession?
an extended period of contraction
a disrupted period of expansion
a relatively low peak
Rapid improvements in technology MOST often contribute to which type of unemployment?
structural unemployment
frictional unemployment
classical unemployment
An entrepreneur is analyzing economic trends and government policy to decide when to start a new business creating goods that will be sold domestically. What type of government policy would be most beneficial for the entrepreneur?
a foreign policy eliminating tariffs on imported goods
A foreign policy eliminating tariffs on imported goods would likely increase competition for domestic producers of goods and would not be the most beneficial type of policy for the entrepreneur.
a monetary policy promoting the goal of price stability
When prices are stable, entrepreneurs are better able to predict how much money they will need to successfully fund a new business or product launch. This is the most beneficial type of policy for the entrepreneur.
a tax policy increasing the tax rate on corporate income
If the entrepreneur decides to form a corporation, he or she will have to pay a higher tax rate under such a policy. The entrepreneur may not be affected by the change in tax policy if he or she forms a different type of business organization, but a monetary policy promoting the goal of price stability would still be a more beneficial type of policy for the entrepreneur.
Who is the highest official in the Federal Reserve System?
the Secretary of the Treasury
the Commissioner of Internal Revenue
the Chair of the Federal Reserve Board
the president of the Federal Reserve Bank
How could the Federal Reserve Board slow economic growth?
It could lower the discount rate.
It could raise reserve requirements.
It could decrease the interest rate on reserves.
It could buy government securities on the open market.
What monetary policy would the Federal Reserve adopt to control inflation?
lowering federal tax rates
increasing federal tax rates
lowering the supply of money
In order to manipulate the inflation rate in the United States, the Federal Reserve targets a lower federal funds rate. What will occur as a result? Select all that apply.
Banks will increase interest rates on loans to each other.
Banks will lower interest rates on loans to each other.
The amount of liquid currency in the economy will decrease.
The amount of liquid currency in the economy will increase.
The inflation rate of the US dollar will increase.
Which stage of the business cycle is characterized by the leveling off of economic growth?
contraction
peak
recovery
trough
Government borrowing can benefit economic growth if the funds procured are used in which of the following ways?
to back capital debts
to back revenue debts
to finance capital spending
Read the passage. Then answer the question that follows.
After midterm elections, a new political party took power in Congress. Unhappy with the previous ruling party's governing and the presidential administration's mishandling of the budget, Congress passed their own law funding the government by a two-thirds majority, over the president's veto. Congress refused to increase the military budget and reduced subsidies to corporate farms. Further legislation increased the tax rate on individuals making over $250,000 per year and families making over $500,000.
What is the MOST LIKELY effect of Congress's actions?
The government will operate with a budget surplus and the national debt will grow.
The government will operate with a budget surplus and the national debt will shrink.
The government will operate with a budget deficit and the national debt will grow.
Which answer choice illustrates a case of frictional unemployment?
Hudson has been let go from the company at which he was employed for a decade due to budget cuts.
Ezra was fired from her factory job due to the company's increased reliance on robotic technology.
Addison has recently relocated from Ithaca, New York, to Augusta, Georgia, and has had difficulty finding a job in her field.
The government of Country Z wants to stimulate the country's stagnant economy. To do so, the government reduces the income tax rate for most of the country's population so that the people will have more money to spend. The government then begins an ambitious public works project. What is one likely effect of Country Z's fiscal policies?
Country Z's economy will contract.
The inflation rate in Country Z will rise.
Country Z will enter a period of stagflation.
Which answer choice illustrates the difference between the national debt and a fiscal deficit?
The national debt relates to consumer and business activity and results from declines in demand and supply. Fiscal deficits are related to government spending and revenue.
A national debt results when import levels surpass export levels. A fiscal deficit results when export levels surpass import levels, causing shortages.
A fiscal deficit is dependent on the inflation rate in the nation's economy. The national debt is a reflection of the value of the nation's currency compared to foreign currencies.
A fiscal deficit is when government spending for a given year is greater than government revenue. The national debt represents the amount of money owed by the government to creditors.
