Question

1) An increase in the required reserves will

Select the correct answer below:

a) contract money supply

b) expand money supply

c) not have an effect on money supply

d) reduce money supply to zero

2) Which of the following are true of state and local revenues?

Select all that apply:

a) The federal government passes some of its revenues to state and local governments

b) Property taxes are are not a part of the state and local governments revenues

c) Sales tax is not a part of state and local governments revenues

d) Corporate taxes are a relatively small part of the state and local governments revenues

3) Which of the following represents a situation where tax revenues exceed government spending?

Select the correct answer below:

a) Budget surplus

b) Budget deficit

c) Federal tax

d) Balanced budget

4) An expansionary monetary policy will shift the Supply for Loanable Funds to the __________ which will ________ interest rates.

Select the correct answer below:

a) right; reduce

b) right; increase

c) left; reduce

d) left; increase

5) Which of the following is NOT correct about a budget deficit?

Select the correct answer below:

a) A budget deficit is a financial situation in which the government receives more money in taxes than it spends in a year.

b) A budget deficit often occurs during recessions when tax revenues drop.

c) A budget deficit is a financial situation in which the federal government spends more money than it receives in taxes in a given year.

d) A budget deficit is a financial situation in which the federal government has to borrow money in order to cover some of its expenditures.

Answer 1

1) a) contract money supply
(Increase in the reserve ratio decreases the money supply.)

2) a) The federal government passes some of its revenues to state and local governments
d) Corporate taxes are a relatively small part of the state and local governments revenues
(Property tax and sales tax are also a part of state and local governments revenues)

3) a) Budget surplus
(When revenues > spending then there is budget surplus.)

4) a) right; reduce
(Expansionary monetary policy increases the supply of loanable funds which reduces the interest rates.)

5) a) A budget deficit is a financial situation in which the government receives more money in taxes than it spends in a year
(Under a deficit, government receives less money in taxes than it spends in a year.)