Question 1

The "perfect financial storm" that developed in 2008, which put the U.S. economy was on the verge of collapse was characterized by which of the following?

Accepted Answer

A)  The housing price "bubble" burst in 2006 and began a sharp decline. 
B)  Stock market prices began a sharp increase. 
C)  Many of the mortgage-related debt securities originated and sold to others, or held, by banks became easy to value during the perfect financial storm. 
D)  Individuals and businesses were defaulting on loans and home mortgages in increasing numbers due to increasing home prices. 
A)  The housing price "bubble" burst in 2006 and began a sharp decline. 
B)  Stock market prices began a sharp increase. 
C)  Many of the mortgage-related debt securities originated and sold to others, or held, by banks became easy to value during the perfect financial storm. 
D)  Individuals and businesses were defaulting on loans and home mortgages in increasing numbers due to increasing home prices.

Question 2

The output of goods and services in an economy is referred to as the gross domestic product.

Accepted Answer

A) True 
 B)False

Question 3

Transfer payments are income payments for which no current productive service is rendered.

Accepted Answer

A) True 
 B)False

Question 4

The U.S. banking system has the ability to alter the size of the money supply because of the use of

Accepted Answer

A)  a 100% reserve system. 
B)  a fractional reserve system. 
C)  the Federal Reserve System's excess reserves. 
D)  Federal Reserve notes issued by the U.S. Treasury. 
A)  a 100% reserve system. 
B)  a fractional reserve system. 
C)  the Federal Reserve System's excess reserves. 
D)  Federal Reserve notes issued by the U.S. Treasury.

Question 5

Assume that a bank receives a primary deposit of $1,000. If the reserve requirement is 25%, what will be the amount of excess reserves available for lending purposes?

Accepted Answer

A)  zero 
B)  $250 
C)  $750 
D)  $1,000 
A)  zero 
B)  $250 
C)  $750 
D)  $1,000

Question 6

Occurs when tax revenues are more than expenditures.

Accepted Answer

A)  Federal budget 
B)  Budget surplus 
C)  Balanced budget 
D)  Monetizing the debt 
A)  Federal budget 
B)  Budget surplus 
C)  Balanced budget 
D)  Monetizing the debt

Question 7

Temporary federal programs that stabilize economic activity are called

Accepted Answer

A)  transfer payments. 
B)  leveling programs. 
C)  social insurance programs. 
D)  discretionary policies. 
A)  transfer payments. 
B)  leveling programs. 
C)  social insurance programs. 
D)  discretionary policies.

Question 8

Assume that a banking system must keep reserves of 20% against deposits. The bank receives a primary deposit of $10,000. What would be the maximum amount of loan that could be made by the system?

Accepted Answer

A)  $16,000 
B)  $40,000 
C)  $80,000 
D)  $100,000 
A)  $16,000 
B)  $40,000 
C)  $80,000 
D)  $100,000

Question 9

To equal M1 money supply, the monetary base

Accepted Answer

A)  is multiplied by the money multiplier 
B)  is added to by the money multiplier 
C)  is subtracted from the money multiplier 
D)  is divided by the money multiplier 
A)  is multiplied by the money multiplier 
B)  is added to by the money multiplier 
C)  is subtracted from the money multiplier 
D)  is divided by the money multiplier

Question 10

Our country's economic policy actions are directed toward all of the following goals except

Accepted Answer

A)  balance in the federal budget. 
B)  high employment. 
C)  price stability. 
D)  economic growth. 
A)  balance in the federal budget. 
B)  high employment. 
C)  price stability. 
D)  economic growth.

Question 11

In an effort to stimulate economic activity, Congress and the president passed the $787 billion _________________________________ in February, 2009 with the funds to be used to provide tax relief, appropriations, and direct spending.

Accepted Answer

A)  American Reconstruction and Reconfiguration Act of 2009 
B)  American Real Estate and Reconstruction Act of 2009 
C)  American Real Estate Reinvestment Act of 2009 
D)  American Recovery and Reinvestment Act of 2009 
A)  American Reconstruction and Reconfiguration Act of 2009 
B)  American Real Estate and Reconstruction Act of 2009 
C)  American Real Estate Reinvestment Act of 2009 
D)  American Recovery and Reinvestment Act of 2009

Question 12

Social Security tax receipts tend to increase during economic downturns.

Accepted Answer

A) True 
 B)False

Question 13

The fiscal policy effects of a tax cut occur more slowly than an increase in government spending.

Accepted Answer

A) True 
 B)False

Question 14

Deposits that add new reserves to the bank where they are deposited are called

Accepted Answer

A)  primary deposits. 
B)  derivative deposits. 
C)  secondary deposits. 
D)  Special Drawing Rights. 
A)  primary deposits. 
B)  derivative deposits. 
C)  secondary deposits. 
D)  Special Drawing Rights.

Question 15

Fed buys government securities to help finance a budget deficit and to add to bank reserves and increase the money supply.

Accepted Answer

A)  Quantitative easing 
B)  Budget surplus 
C)  Budget deficit 
D)  Monetizing the debt 
A)  Quantitative easing 
B)  Budget surplus 
C)  Budget deficit 
D)  Monetizing the debt

Question 16

A primary focus of the Economic Stabilization Act of 2008, which became known as the ___________________________, was to allow the U.S. Treasury purchase up to $700 billion of troubled or toxic assets held by financial institutions.

Accepted Answer

A)  Troubled Asset Relief Program (TARP) 
B)  Toxic Asset Recovery Program (TARP) 
C)  Troubled Area Relief Program (TARP) 
D)  Toxic Area Recovery Program (TARP) 
A)  Troubled Asset Relief Program (TARP) 
B)  Toxic Asset Recovery Program (TARP) 
C)  Troubled Area Relief Program (TARP) 
D)  Toxic Area Recovery Program (TARP)

Question 17

If the reserve requirement is 25% and $5,000 is injected into the banking system, the maximum expansion in the money supply would be

Accepted Answer

A)  $1,250. 
B)  $20,000. 
C)  $6,667. 
D)  $4,000. 
A)  $1,250. 
B)  $20,000. 
C)  $6,667. 
D)  $4,000.

Question 18

Government financing of large budgetary deficits

Accepted Answer

A)  absorbs savings and decreases interest rates. 
B)  may crowd out private borrowers. 
C)  is known as monetizing the deficit. 
D)  reduces total consumer spending and demand. 
A)  absorbs savings and decreases interest rates. 
B)  may crowd out private borrowers. 
C)  is known as monetizing the deficit. 
D)  reduces total consumer spending and demand.

Question 19

When income taxes are cut, disposable income is slowly increased under our system of tax withholding.

Accepted Answer

A) True 
 B)False

Question 20

During the 2007 - 2009 financial crisis, ___________ and __________, who were major participants in the secondary mortgage markets, were on the verge of financial insolvency and possible collapse in mid-2008.

Accepted Answer

A)  Fannie Mae; Freddie Mac 
B)  the Federal Treasury; the Federal Reserve 
C)  Morgan Stanley; Smith Barney 
D)  Washington Mutual; Lehman Brothers 
A)  Fannie Mae; Freddie Mac 
B)  the Federal Treasury; the Federal Reserve 
C)  Morgan Stanley; Smith Barney 
D)  Washington Mutual; Lehman Brothers

The "perfect financial storm" that developed in 2008, which put the U.S. economy was on the verge of collapse was characterized by which of the following?

The output of goods and services in an economy is referred to as the gross domestic product.

Transfer payments are income payments for which no current productive service is rendered.

The U.S. banking system has the ability to alter the size of the money supply because of the use of

Assume that a bank receives a primary deposit of $1,000. If the reserve requirement is 25%, what will be the amount of excess reserves available for lending purposes?

Occurs when tax revenues are more than expenditures.

Temporary federal programs that stabilize economic activity are called

Assume that a banking system must keep reserves of 20% against deposits. The bank receives a primary deposit of $10,000. What would be the maximum amount of loan that could be made by the system?

To equal M1 money supply, the monetary base

Our country's economic policy actions are directed toward all of the following goals except

In an effort to stimulate economic activity, Congress and the president passed the $787 billion _________________________________ in February, 2009 with the funds to be used to provide tax relief, appropriations, and direct spending.

Social Security tax receipts tend to increase during economic downturns.

The fiscal policy effects of a tax cut occur more slowly than an increase in government spending.

Deposits that add new reserves to the bank where they are deposited are called

Fed buys government securities to help finance a budget deficit and to add to bank reserves and increase the money supply.

A primary focus of the Economic Stabilization Act of 2008, which became known as the ___________________________, was to allow the U.S. Treasury purchase up to $700 billion of troubled or toxic assets held by financial institutions.

If the reserve requirement is 25% and $5,000 is injected into the banking system, the maximum expansion in the money supply would be

Government financing of large budgetary deficits

When income taxes are cut, disposable income is slowly increased under our system of tax withholding.

During the 2007 - 2009 financial crisis, _ and , who were major participants in the secondary mortgage markets, were on the verge of financial insolvency and possible collapse in mid-2008.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 5: Policy Makers and the Money Supply

The "perfect financial storm" that developed in 2008, which put the U.S. economy was on the verge of collapse was characterized by which of the following?

The output of goods and services in an economy is referred to as the gross domestic product.

Transfer payments are income payments for which no current productive service is rendered.

The U.S. banking system has the ability to alter the size of the money supply because of the use of

Assume that a bank receives a primary deposit of $1,000. If the reserve requirement is 25%, what will be the amount of excess reserves available for lending purposes?

Occurs when tax revenues are more than expenditures.

Temporary federal programs that stabilize economic activity are called

Assume that a banking system must keep reserves of 20% against deposits. The bank receives a primary deposit of $10,000. What would be the maximum amount of loan that could be made by the system?

To equal M1 money supply, the monetary base

Our country's economic policy actions are directed toward all of the following goals except

In an effort to stimulate economic activity, Congress and the president passed the $787 billion _________________________________ in February, 2009 with the funds to be used to provide tax relief, appropriations, and direct spending.

Social Security tax receipts tend to increase during economic downturns.

The fiscal policy effects of a tax cut occur more slowly than an increase in government spending.

Deposits that add new reserves to the bank where they are deposited are called

Fed buys government securities to help finance a budget deficit and to add to bank reserves and increase the money supply.

A primary focus of the Economic Stabilization Act of 2008, which became known as the ___________________________, was to allow the U.S. Treasury purchase up to $700 billion of troubled or toxic assets held by financial institutions.

If the reserve requirement is 25% and $5,000 is injected into the banking system, the maximum expansion in the money supply would be

Government financing of large budgetary deficits

When income taxes are cut, disposable income is slowly increased under our system of tax withholding.

During the 2007 - 2009 financial crisis, ___________ and __________, who were major participants in the secondary mortgage markets, were on the verge of financial insolvency and possible collapse in mid-2008.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

During the 2007 - 2009 financial crisis, _ and , who were major participants in the secondary mortgage markets, were on the verge of financial insolvency and possible collapse in mid-2008.