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WorksheetsChapter 11-12 Economics Study Guide
Total questions: 99
Worksheet time: 50mins
The Rule of 72 is used to figure out how long money must stay on deposit to triple.
True
False
Escheat laws stipulate that dormant accounts be given to the state after a certain period.
True
False
True or False. Banks post interest as often as they compound it.
True
False
The nominal interest rate of a deposit increases as the frequency of compounding increases.
True
False
To attract sizable deposits, financial institutions offer lower nominal interest rates.
True
False
The more frequently a bank compounds the interest on an account, the better it is for the depositor.
True
False
True or False. It is more important to take note of the nominal interest rate of an account than its effective interest rate.
True
False
True or False
Nominal interest rates are usually expressed in biannual terms.
True
False
True or False
Compound interest refers to doubling the rate of interest on an account.
True
False
True or False
The interest rate of a savings account is very important.
True
False
True or False
An important principle of money management is to never let your money sit idle.
True
False
True or False
The parable of the talents supports earning interest by lending your idle cash.
True
False
True or False
"Frugal months" are best undertaken when utility bills will be low.
True
False
True or False
A wire transfer is an electronic transfer of funds from a customer's account to a particular retailer.
True
False
True or False
If a bank has an EFTS, customers are less likely to use cash.
True
False
True or False
Financial planners advocate saving 10 percent of your income each month.
True
False
True or False
The Christian's first financial responsibility should be to save.
True
False
True or False
Saving consists of both setting aside money and reducing expenses.
True
False
True or False
Frederic Bastiat satirically presented the sun as unfair economic competition.
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False
True or False
NAFTA is supported by American protectionists.
True
False
True or False
Consumers suffer the most from free trade.
True
False
True or False
Tariffs are meant primarily to limit the number of foreign goods imported into a country.
True
False
True or False
Advocates of free trade value producers over consumers.
True
False
True or False
Per capita real GDP is the true measure of a nation's wealth.
True
False
True or False
Since 1976 the United States' trade deficit has continually increased.
True
False
True or False
Environmental damages are not factored into a nation's GDP.
True
False
True or False
The GDP does not account for all the final goods and services sold in a country.
True
False
True or False
The United States' governmental spending reached its highest proportion of the GDP in the 1970s.
True
False
True or False
A business's unsold inventory is still considered intermediate goods.
True
False
True or False
The GPDI includes capital investment and unplanned inventory.
True
False
True or False
Consumer services make up the largest portion of household consumption.
True
False
True or False
A company's goods produced on foreign soil are still counted as part of its country's GDP.
True
False
True or False
The GDP measures only the nation's production for the current year.
True
False
True or False
The Depository Institutions Deregulation and Monetary Control Act of 1980 required all banks to abide by the Fed’s reserve requirement rate.
True
False
True or False
To address an overheated economy, the Fed would lower interest rates.
True
False
True or False
If the Fed continually creates more money to stimulate the economy, prices will rise dangerously.
True
False
True or False
To buy governmental bonds, the Fed creates its own money by adjusting its books.
True
False
True or False
Tight monetary policy seeks to reduce the money supply.
True
False
True or False
Changing the reserve requirement is one of the Fed's most commonly used tools.
True
False
True or False
If the Federal Open Market Committee wants to increase the money supply by a certain amount, it uses the discount rate to help it determine the amount of governmental bonds it should buy.
True
False
True or False
The discount rate refers to the interest banks charge on loans to customers.
True
False
True or False
The factor 1/rr is used to figure the discount rate.
True
False
True or False
As the nation's fiscal agent, the Fed advises both the president and Congress.
True
False
True or False
Checks that are written out of an account at one bank and deposited at another are called “on-us checks.”
True
False
True or False
Most of the checks that Federal Reserve Banks process come as electronic check images.
True
False
True or False
No one except the president of the United States may look at the Fed's books without its permission.
True
False
True or False
Congress has the power to check the Fed if necessary.
True
False
True or False
Members of the Fed's Board of Governors may serve fourteen years without reappointment.
True
False
True or False
The reserve requirement is a specified percentage of banks' deposits that they must loan to business firms.
True
False
True or False
Financier J. P. Morgan risked his own wealth to back the US government in a financial crisis.
True
False
True or False. The United States Constitution established a central bank.
True
False
What is one way the Fed receives its operating funds?
congressional budget
fees charged to banks
trust fund
creating elastic currency
Who mints money?
Internal Revenue Service
US Treasury
commercial banks
Federal Reserve Bank
Which of the following activities is included in the GDP?
buying wood for a new fence
building a fence around your yard
trading some leftover wood for paint
dumping leftover paint in a landfill
Who suffers the most from protectionist legislation?
noncompetitive domestic industries
competitive domestic industries
domestic consumers
foreign consumers
Who suffers the most from free trade?
noncompetitive domestic industries
competitive domestic industries
domestic consumers
foreign consumers
Who ultimately pays for foreign governmental subsidies?
foreign businesses
foreign taxpayers
domestic businesses
domestic consumers
Which of the following is not true of David Ricardo?
He made his fortune at a young age.
He won the Nobel Prize in Economics.
He was a member of the British Parliament.
He was a strong advocate of free trade.
Which of the following is not a possible reason for trade deficits?
better quality of foreign goods
cheaper foreign material
surplus foreign production
lower foreign capital costs
Why does America import most of its bananas and coffee?
domestic inability to produce goods
foreign governmental subsidies
lower foreign capital costs
lower foreign wages
The American trade deficit is generally considered problematic for all the following reasons except which one?
It generally produces more foreign jobs at the expense of American jobs.
It indicates that the country is more of a consumer than a producer.
It damages America's reputation as a quality manufacturer.
It shows that governmental regulation has stifled manufacturing.
What is the true measure of a nation's wealth?
nominal GDP
real GDP
GDPI
per capita real GDP
Which category of the GDP includes spending on unplanned inventories?
consumer services
consumer durable goods
consumer nondurable goods
business investments
Which of the following would be considered a private domestic investment?
twenty gallons of paint purchased by a homeowner
a mill purchased by a textile company
a copier purchased by the DMV
two jets purchased by a foreign airline
Which category of the GDP includes furniture?
consumer services
consumer durable goods
consumer nondurable goods
business investments
Which of the following categories accounts for the largest number of purchases in America?
consumer services
consumer durable goods
consumer nondurable goods
business investments
Which of the following is not true of Simon Kuznets?
He immigrated to America from the Soviet Union.
He originated the measurement of national income.
He worked as a reporter for the Wall Street Journal.
He was awarded the Nobel Prize in Economics.
Which of the following purchases would not be counted in a nation's GDP?
an apartment
an airline ticket
a designer gown
a Monet painting
Which item would be included as a final good in the GDP?
trucks a dealership has not sold at the end of the year
steel slabs purchased by a refrigerator manufacturer
a house purchased by a real-estate investment firm
vegetables raised in family gardens
Which of the following is designed primarily to be used as an intermediate good?
washing machines
real estate
steel beams
picture frames
Which of the following is not a purpose for collecting national economic data?
to determine the nation's economic progress
to calculate appropriate income tax rates
to assess the overall health of the nation's economy
to evaluate the nation's success in international markets
The formula for the Rule of 72 is
Number of years × Interest rate = 72.
0.72 × Number of years = Interest rate.
Interest rate/Number of years = 0.72.
Interest rate × 72 = Number of years.
Which kind of interest is calculated only once at the end of the year?
nominal interest
simple interest
effective interest
progressive interest
Which of the following is not one of the three factors that determine how much a deposit grows?
the nominal rate of interest
the frequency of compounding
the state's escheat laws
the duration of the account
If you deposit $500 in a savings account paying 5% interest annually, what will your account balance be at the end of two years?
$525
$550
$551.25
$602.50
What happens to prices if the supply of money remains unchanged while the number of goods and services increases?
Prices fall.
Prices rise.
Prices remain stable.
Prices sporadically rise and fall.
What is one major reason that the Fed manipulates the supply of money?
to help the leading political party
to discourage speculation
to stabilize prices
to pay for governmental programs
If the economy is threatened with a slowdown, how would you expect the Fed to respond?
sell governmental securities
buy governmental securities
increase the reserve requirement
increase the discount rate
Which method of changing the money supply does the Fed most commonly use?
open market operations
changing the discount rate
changing the reserve requirement
granting charters
Why has the Fed historically been reluctant to change the reserve requirement?
The reserve requirement has little effect on the money supply.
The reserve requirement has a dramatic effect on the money supply.
Changes in the reserve requirement need congressional approval.
Most banks would close if the reserve requirement were changed.
The Fed's practice of discounting refers to its
writing off banks' debts.
reducing the money supply.
lowering of interest rates.
lending money to banks.
Should a run on a particular bank occur, what important role would the Fed play for that bank?
It would help the bank close down.
It would raise the bank's reserve requirement.
It would serve as a lender of last resort.
It would engage in open market operations.
How does the Fed act as a fiscal agent?
It holds the government's account.
It serves as a lender of last resort.
It regulates member banks.
It clears checks.
The term elastic applies specifically to what kind of currency?
a currency that can expand with the economy
a currency that is not tied to the gold standard
a currency that rebounds quickly from recession
a currency that is uniform throughout the country
According to the text, the Federal Reserve System is independent in all but which of the following ways?
politically independent
operationally independent
financially independent
technologically independent
What one person is specifically required to sit on the Federal Open Market Committee?
vice president of the United States
chair of the Fed's Board of Governors
secretary of commerce
president of New York's Federal Reserve bank
Why is the Federal Reserve independent of Congress?
The president created the Federal Reserve.
Congress could not reach a compromise when it created the Federal Reserve.
Congress wanted the money supply to be free from political control.
Congress wanted the Federal Reserve to be free from bureaucracy.
All but which of the following are true of the chair of the Fed's Board of Governors?
serves a four-year term
appointed by the Board of Governors
advises the president and Congress on economic issues
guides the actions of the Fed through his or her economic philosophy
Who buys and sells Treasury bills and Treasury notes?
Internal Revenue Service
US Treasury
Federal Open Market Committee
Fed's Board of Governors
Who selects the members of the Fed's Board of Governors?
United States Congress
president of the United States
Federal Reserve district banks
American voters
What institution makes major decisions regarding the money supply?
Federal Reserve district banks
US Treasury
Federal Open Market Committee
stock market
During his lifetime, what important part did J. P. Morgan play in the United States' finances?
He was the first chair of the Fed's Board of Governors.
He pushed control of the money supply as an economic stabilizer.
He helped create the Federal Reserve System.
He provided financial advice and backing for the government.
Who is not included on the board of directors for a Federal Reserve district bank?
representatives of Congress
bankers
businesspersons
representatives of the public
The Federal Reserve System divides the nation into how many districts?
6
8
10
12
What is an institution that controls and accommodates a nation's finances?
a central bank
a national treasury
a stock exchange
a financial market
What percentage of a financial windfall do financial advisors recommend saving?
15 percent
30 percent
50 percent
75 percent
Which of the following is not an application of an EFTS?
wire transfers
ATMs
personal checks
point-of-sale systems
Generally speaking, what is most necessary for accumulating a significant amount of savings?
receiving financial windfalls
making a savings plan
raising your income level
reducing your tax burden
Most financial planners advise clients to save how much of their monthly paychecks?
2 percent
5 percent
10 percent
15 percent
