Question 1

During the Great Depression fiscal and monetary policy was characterized by

Accepted Answer

A)  an increase in tax rates and a contraction in the money supply. 
B)  a decrease in tax rates and a contraction in the money supply. 
C)  a decrease in tax rates and an expansion in the money supply. 
D)  an increase in tax rates and an expansion in the money supply. 
A)  an increase in tax rates and a contraction in the money supply. 
B)  a decrease in tax rates and a contraction in the money supply. 
C)  a decrease in tax rates and an expansion in the money supply. 
D)  an increase in tax rates and an expansion in the money supply.

Question 2

Concerning government spending, which of the following is true?

Accepted Answer

A)  In 1916, the per person real government expenditures were approximately 60 times greater than in 1800. 
B)  Prior to 1929, government expenditures at the state and local levels were substantially smaller than federal expenditures. 
C)  Real federal spending per person was approximately 75 times greater in the most recent fiscal year than in 1916. 
D)  All of the above are true. 
A)  In 1916, the per person real government expenditures were approximately 60 times greater than in 1800. 
B)  Prior to 1929, government expenditures at the state and local levels were substantially smaller than federal expenditures. 
C)  Real federal spending per person was approximately 75 times greater in the most recent fiscal year than in 1916. 
D)  All of the above are true.

Question 3

If an investor's primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk?

Accepted Answer

A)  BP / Amoco. 
B)  Shell Oil Corporation. 
C)  General Motors. 
D)  Texaco. 
A)  BP / Amoco. 
B)  Shell Oil Corporation. 
C)  General Motors. 
D)  Texaco.

Question 4

Since 1802, the American stock market has yielded an average annual real return (the return adjusted for inflation) of approximately

Accepted Answer

A)  3 percent. 
B)  5 percent. 
C)  7 percent 
D)  11 percent. 
A)  3 percent. 
B)  5 percent. 
C)  7 percent 
D)  11 percent.

Question 5

In recent years, what percentage of American families have derived income transfers from at least one government transfer program?

Accepted Answer

A)  less than 20 percent 
B)  approximately 55 percent 
C)  approximately 62 percent 
D)  nearly 75 percent 
A)  less than 20 percent 
B)  approximately 55 percent 
C)  approximately 62 percent 
D)  nearly 75 percent

Question 6

What did Keynes and Hayek believe about government central planning?

Accepted Answer

A)  Both believed that central planning could be used to allocate resources efficiently. 
B)  Both believed that perverse political incentives would undermine the ability of central planners to allocate resources efficiently. 
C)  Keynes believed that government central planning could improve on market outcomes; Hayek disagreed, arguing that both political incentives and insufficient information would undermine their ability to do so. 
D)  Keynes believe that central planning would fail because the policy-makers did not have sufficient information to plan efficiently; Hayek believed that efficient central planning was possible if political decisions were made democratically. 
A)  Both believed that central planning could be used to allocate resources efficiently. 
B)  Both believed that perverse political incentives would undermine the ability of central planners to allocate resources efficiently. 
C)  Keynes believed that government central planning could improve on market outcomes; Hayek disagreed, arguing that both political incentives and insufficient information would undermine their ability to do so. 
D)  Keynes believe that central planning would fail because the policy-makers did not have sufficient information to plan efficiently; Hayek believed that efficient central planning was possible if political decisions were made democratically.

Question 7

When the Social Security surplus is used to cover the current operating expenses of the federal government, it will

Accepted Answer

A)  make it easier for future taxpayers to provide promised Social Security benefits to baby boomers. 
B)  reduce the outstanding debt of the federal government. 
C)  make it possible for Congress and the president to spend more without raising current taxes or borrowing from the general public. 
D)  increase the credibility of the Social Security benefits promised to future retirees. 
A)  make it easier for future taxpayers to provide promised Social Security benefits to baby boomers. 
B)  reduce the outstanding debt of the federal government. 
C)  make it possible for Congress and the president to spend more without raising current taxes or borrowing from the general public. 
D)  increase the credibility of the Social Security benefits promised to future retirees.

Question 8

If the U.S. economy grew rapidly in the future, would this eliminate the long run deficit of Social Security?

Accepted Answer

A)  No; future Social Security benefits are tied to nominal wages and therefore increases in real incomes will also increase the future retirement benefits. 
B)  Yes; a rapid real growth rate would increase tax revenues without increasing the real benefit levels of future recipients. 
C)  Yes, more rapid growth would lead to inflation and this would help eliminate the system's long run deficit. 
D)  Yes, but only if the rapid growth led to a substantial increase in net exports. 
A)  No; future Social Security benefits are tied to nominal wages and therefore increases in real incomes will also increase the future retirement benefits. 
B)  Yes; a rapid real growth rate would increase tax revenues without increasing the real benefit levels of future recipients. 
C)  Yes, more rapid growth would lead to inflation and this would help eliminate the system's long run deficit. 
D)  Yes, but only if the rapid growth led to a substantial increase in net exports.

Question 9

According to the Keynesian view, capitalism

Accepted Answer

A)  is a highly productive form of economic organization that works best when government intervention is least. 
B)  experiences booms and busts because of the instability of private investment that is driven by fickle changes in business optimism. 
C)  experiences booms and busts that are primarily the result of inappropriate monetary policy. 
D)  experiences fluctuations in aggregate demand that cannot be controlled with fiscal policy. 
A)  is a highly productive form of economic organization that works best when government intervention is least. 
B)  experiences booms and busts because of the instability of private investment that is driven by fickle changes in business optimism. 
C)  experiences booms and busts that are primarily the result of inappropriate monetary policy. 
D)  experiences fluctuations in aggregate demand that cannot be controlled with fiscal policy.

Question 10

Which of the following is a risk that investors undertake when purchasing stocks?

Accepted Answer

A)  An individual stock can rise and fall unpredictably. 
B)  Nearly all stocks in the stock market may rise or fall together, when expectations about the entire economy change. 
C)  Both a and b are true. 
D)  Neither a nor b is true. 
A)  An individual stock can rise and fall unpredictably. 
B)  Nearly all stocks in the stock market may rise or fall together, when expectations about the entire economy change. 
C)  Both a and b are true. 
D)  Neither a nor b is true.

Question 11

The stock price of a firm is primarily a reflection of the

Accepted Answer

A)  firm's current net earnings per share. 
B)  firm's expected future net earnings per share. 
C)  discounted value of the firm's expected future net earnings per share. 
D)  firm's current net earnings per share multiplied by the interest rate. 
E)  book value of the firm. 
A)  firm's current net earnings per share. 
B)  firm's expected future net earnings per share. 
C)  discounted value of the firm's expected future net earnings per share. 
D)  firm's current net earnings per share multiplied by the interest rate. 
E)  book value of the firm.

Question 12

Interest payments on home mortgages and home equity loans are tax deductible.  This tax deductibility encourages households to

Accepted Answer

A)  shift other forms of debt to their home mortgage. 
B)  increase the equity in their house. 
C)  make larger payments and pay down their mortgage loan more rapidly. 
D)  decrease the overall amount of household debt in relation to household income. 
A)  shift other forms of debt to their home mortgage. 
B)  increase the equity in their house. 
C)  make larger payments and pay down their mortgage loan more rapidly. 
D)  decrease the overall amount of household debt in relation to household income.

Question 13

The secondary mortgage market is the market

Accepted Answer

A)  designated specifically for prime and other low risk mortgages. 
B)  designated specifically for sub-prime and other high risk mortgages. 
C)  where mortgages originated by a lender are sold to another financial institution. 
D)  where home purchasers borrow funds from mortgage originators. 
A)  designated specifically for prime and other low risk mortgages. 
B)  designated specifically for sub-prime and other high risk mortgages. 
C)  where mortgages originated by a lender are sold to another financial institution. 
D)  where home purchasers borrow funds from mortgage originators.

Question 14

Which of the following is true of stocks?

Accepted Answer

A)  Stock ownership is risky because the investor can never be sure what return they will earn or what the value of their stock holdings will be in the future. 
B)  The riskiness of stocks is one reason why their average rate of return has been higher than investments like bonds that guarantee a specified nominal amount in the future. 
C)  Both a and b are true. 
D)  Neither a nor b is true. 
A)  Stock ownership is risky because the investor can never be sure what return they will earn or what the value of their stock holdings will be in the future. 
B)  The riskiness of stocks is one reason why their average rate of return has been higher than investments like bonds that guarantee a specified nominal amount in the future. 
C)  Both a and b are true. 
D)  Neither a nor b is true.

During the Great Depression fiscal and monetary policy was characterized by

Concerning government spending, which of the following is true?

If an investor's primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk?

Since 1802, the American stock market has yielded an average annual real return (the return adjusted for inflation) of approximately

In recent years, what percentage of American families have derived income transfers from at least one government transfer program?

What did Keynes and Hayek believe about government central planning?

When the Social Security surplus is used to cover the current operating expenses of the federal government, it will

If the U.S. economy grew rapidly in the future, would this eliminate the long run deficit of Social Security?

According to the Keynesian view, capitalism

Which of the following is a risk that investors undertake when purchasing stocks?

The stock price of a firm is primarily a reflection of the

Interest payments on home mortgages and home equity loans are tax deductible. This tax deductibility encourages households to

The secondary mortgage market is the market

Which of the following is true of stocks?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 20: Special Topics

During the Great Depression fiscal and monetary policy was characterized by

Concerning government spending, which of the following is true?

If an investor's primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk?

Since 1802, the American stock market has yielded an average annual real return (the return adjusted for inflation) of approximately

In recent years, what percentage of American families have derived income transfers from at least one government transfer program?

What did Keynes and Hayek believe about government central planning?

When the Social Security surplus is used to cover the current operating expenses of the federal government, it will

If the U.S. economy grew rapidly in the future, would this eliminate the long run deficit of Social Security?

According to the Keynesian view, capitalism

Which of the following is a risk that investors undertake when purchasing stocks?

The stock price of a firm is primarily a reflection of the

Interest payments on home mortgages and home equity loans are tax deductible. This tax deductibility encourages households to

The secondary mortgage market is the market

Which of the following is true of stocks?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters