11. Which of the following could cause the US economy to go into a recession? A. None of the choices is correct B. All of the choices are correct C. a declining stock market and an increase in unemployment D. a decrease in Aggregate Demand E. an increase in pessimism by consumers and businesses
12. Which of the following could help pull the US economy out of a recession? A. All of the choices are correct B. declining stock market and an increase in unemployment C. an increase in pessimism by consumers and businesses D. None of the choices is correct E. a decrease in Aggregate Demand
13. In a barter system, A. payment must be cash, i.e. no financing of large purchases like cars and homes B. paper money and electronic payments are used, but people bargain for prices C. one good or service is exchanged for another good or service D. sea shells are used as money E. paper money is used, but people bargain for prices
14. Which of the following is a function of money? A. a medium of exchange B. All of the choices are correct C. a store of value D. a unit of account
15. If the required reserve ratio is 10% and a bank has $100,000 in excess reserves, the maximum amount the bank can loan is _________ A. 10% of the excess reserves B. This is a trick question since banks must hold onto 100% of their excess reserves C. 100% of the excess reserves. D. 20% of the excess reserves. E. 30% of the excess reserves\
16. When reserve requirements go down from 15% to 10%, this means banks A. must make more loans. B. must use the money to stay open longer hours C. must use the money to hire more tellers to reduce wait times at the bank. D. are allowed to make more loans than before the reserve requirements were reduced E. None of the choices is correct
17. If the reserve ratio for banks is 25%, what is the money multiplier? A. The money multiplier is 25 if banks do not hold excess reserves B. The money multiplier is 5 if banks do not hold excess reserves C. The money multiplier is 2.5 if banks do not hold excess reserves D. This is a trick question since the reserve ratio has nothing to do with the money supply. E. None of the choices is correct
18. Federal Reserve functions include all of the following except A. promoting stability of the financial system B. providing banking services to the federal government C. conducting monetary policy D. providing banking services to commercial banks E. changing income tax rates to promote job spending by consumers
19. When would the Federal Reserve be most likely to use contractionary monetary policy? A. All of the choices are correct B. When the economy is experiencing rapidly increasing inflation and unemployment is very low. C. When the economy is experiencing deflation and unemployment is very high. D. When the economy is in a recession E. When the economy is in a depression
20. When would the Federal Reserve be most likely to use expansionary monetary policy? A. When the economy is in a recession. B. When real GDP is growing at 4% per year, unemployment is 4% and inflation is 1%. C. Whenever the U.S. president and the senate instruct them to do so D. When the economy is experiencing rapidly increasing inflation. E. Never since expansionary monetary policy is NOT used by the Federal Reserve.
11 Answer is “all of the choices are correct”
12 Answer is “None of the choices are correct”
13 In barter system, “one good or service is exchanged for another good or service”
14Answer is “All of the choices are correct”
15The answer is “100 % of the excess reserves”
If bank has excess reserves, they are free to lend these reserves as loans
16 Answer is “None of the choices are correct”
17 None of the choices are correct
Money multiplier = 1 / 0.25 = 4
18 Federal Reserve functions include all of the following except, “changing income tax rates to promote job spending by consumers”
19 The Federal Reserve be most likely to use contractionary monetary policy when “the economy is experiencing rapidly increasing inflation and unemployment is very low”
20 The Federal Reserve be most likely to use expansionary monetary policy when “the economy is in recession”
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