Question 1

The strong demand for housing, rising housing prices, and a construction boom from 2000 to 2005 were a result of

Accepted Answer

A)  market forces that were eventually cut short by the stock market crash of 2008. 
B)  policy changes that had positive initial effects, but negative long-term effects. 
C)  tightened mortgage lending standards that reduced the risks of obtaining a home mortgage. 
D)  the rising interest rates of that period, which increased the demand for housing. 
A)  market forces that were eventually cut short by the stock market crash of 2008. 
B)  policy changes that had positive initial effects, but negative long-term effects. 
C)  tightened mortgage lending standards that reduced the risks of obtaining a home mortgage. 
D)  the rising interest rates of that period, which increased the demand for housing.

Question 2

Which of the following best explains why the Social Security system will face financial difficulties in the future?

Accepted Answer

A)  Too much Social Security revenue was invested in the private sector rather than in government bonds. 
B)  In the next two decades, the number of workers paying into the system will decline sharply relative to the number of retirees collecting benefits. 
C)  The federal government does not pay interest on the money it borrows from the Social Security system. 
D)  The funds in the Social Security trust fund were invested in high-risk ventures that failed to pay off. 
A)  Too much Social Security revenue was invested in the private sector rather than in government bonds. 
B)  In the next two decades, the number of workers paying into the system will decline sharply relative to the number of retirees collecting benefits. 
C)  The federal government does not pay interest on the money it borrows from the Social Security system. 
D)  The funds in the Social Security trust fund were invested in high-risk ventures that failed to pay off.

Question 3

Which of the following is an implication of the random walk theory?

Accepted Answer

A)  Experts will be able to make money by picking and choosing the best stocks. 
B)  There is a systematic pattern to the movement of prices in the stock market. 
C)  Stock market investors can expect to earn a fairly steady real rate of return of about 7 percent annually. 
D)  Even experts will be unable to predict the future movement of stock prices with any degree of accuracy. 
A)  Experts will be able to make money by picking and choosing the best stocks. 
B)  There is a systematic pattern to the movement of prices in the stock market. 
C)  Stock market investors can expect to earn a fairly steady real rate of return of about 7 percent annually. 
D)  Even experts will be unable to predict the future movement of stock prices with any degree of accuracy.

Question 4

Demographic conditions

Accepted Answer

A)  were much less favorable for the Social Security system in 1950 than is currently the case. 
B)  are currently unfavorable because the number of retirees is growing rapidly as the result of the high birth rate in the United States during 1930-1945. 
C)  will be less favorable for the Social Security system once the baby boom generation begins to retire. 
D)  don't affect the financial status of the Social Security system because it is based on the same principles as private insurance programs. 
A)  were much less favorable for the Social Security system in 1950 than is currently the case. 
B)  are currently unfavorable because the number of retirees is growing rapidly as the result of the high birth rate in the United States during 1930-1945. 
C)  will be less favorable for the Social Security system once the baby boom generation begins to retire. 
D)  don't affect the financial status of the Social Security system because it is based on the same principles as private insurance programs.

Question 5

Which of the following was true with regard to the Great Depression?

Accepted Answer

A)  The policies of the New Deal brought the Great Depression to an end well before World War II. 
B)  Sound economic policy was followed during this era, which makes the length and severity of the Great Depression puzzling to economists. 
C)  The length and severity of the Great Depression was the result of unsound economic policies followed by both the Hoover and Roosevelt Administrations. 
D)  The Great Depression was largely the result of the highly expansionary monetary policy of the Fed during the 1930s. 
A)  The policies of the New Deal brought the Great Depression to an end well before World War II. 
B)  Sound economic policy was followed during this era, which makes the length and severity of the Great Depression puzzling to economists. 
C)  The length and severity of the Great Depression was the result of unsound economic policies followed by both the Hoover and Roosevelt Administrations. 
D)  The Great Depression was largely the result of the highly expansionary monetary policy of the Fed during the 1930s.

Question 6

As short-term interest rates began to rise in 2005, which one of the following mortgage loan categories experienced the largest increase in default and foreclosure rates?

Accepted Answer

A)  Fixed rate mortgages to prime borrowers. 
B)  Fixed rate mortgages to sub-prime borrowers. 
C)  Adjustable rate mortgages extended to both prime and sub-prime borrowers. 
D)  Adjustable rate mortgages to sub-prime borrowers only; the default and foreclosure rates of these loans extended to prime borrowers declined. 
A)  Fixed rate mortgages to prime borrowers. 
B)  Fixed rate mortgages to sub-prime borrowers. 
C)  Adjustable rate mortgages extended to both prime and sub-prime borrowers. 
D)  Adjustable rate mortgages to sub-prime borrowers only; the default and foreclosure rates of these loans extended to prime borrowers declined.

Question 7

Which of the following about stocks and bonds is true?

Accepted Answer

A)  Bond owners are entitled to the fraction of the firm's future revenues represented by their ownership shares. 
B)  As long as the organization issuing the bond is solvent, the bondholder can count on the funds being repaid with interest. 
C)  Stocks provide businesses, governments, and other organizations with a convenient way to borrow money. 
D)  All of the above are true. 
A)  Bond owners are entitled to the fraction of the firm's future revenues represented by their ownership shares. 
B)  As long as the organization issuing the bond is solvent, the bondholder can count on the funds being repaid with interest. 
C)  Stocks provide businesses, governments, and other organizations with a convenient way to borrow money. 
D)  All of the above are true.

Question 8

Measured as a share of GDP, the total government expenditures of the United States are

Accepted Answer

A)  larger than any country in the world. 
B)  smaller than any country in the world. 
C)  smaller than the comparable figure for Japan and most Western European countries. 
D)  larger than the comparable figure for Japan and most Western European countries. 
A)  larger than any country in the world. 
B)  smaller than any country in the world. 
C)  smaller than the comparable figure for Japan and most Western European countries. 
D)  larger than the comparable figure for Japan and most Western European countries.

Question 9

The variation in the rate of return one can expect from ownership of stocks will generally be smaller if

Accepted Answer

A)  all of the funds are invested in a specific sector of the economy such as the automobile industry. 
B)  a diverse set of stocks is held over a lengthy period of time such as 30 or 40 years. 
C)  all of the funds are invested in a single stock. 
D)  the funds are invested for a relatively short period of time. 
A)  all of the funds are invested in a specific sector of the economy such as the automobile industry. 
B)  a diverse set of stocks is held over a lengthy period of time such as 30 or 40 years. 
C)  all of the funds are invested in a single stock. 
D)  the funds are invested for a relatively short period of time.

Question 10

The Social Security retirement program is financed by a 10.6 percent payroll tax that applies to earnings up to an income cutoff that is adjusted upward annually by the growth rate of nominal wages. As of 2016, the income cutoff was

Accepted Answer

A)  $15,000. 
B)  $32,700. 
C)  $118,500. 
D)  $250,000. 
A)  $15,000. 
B)  $32,700. 
C)  $118,500. 
D)  $250,000.

Question 11

High marginal tax rates, such as those instituted during the Great Depression, will

Accepted Answer

A)  increase the incentive of people to earn. 
B)  lead to a proportional increase in tax revenue and a reduction in the size of the budget deficit. 
C)  cause people to work, earn, and invest less than would be the case if marginal tax rates were lower. 
D)  attract workers from other countries where tax rates are lower. 
A)  increase the incentive of people to earn. 
B)  lead to a proportional increase in tax revenue and a reduction in the size of the budget deficit. 
C)  cause people to work, earn, and invest less than would be the case if marginal tax rates were lower. 
D)  attract workers from other countries where tax rates are lower.

Question 12

The 18th century Scottish philosopher Alexander Tytler argued that democracy

Accepted Answer

A)  would survive indefinitely into the future once it was established. 
B)  was the only form of government that would be able to control excessive government spending financed by debt. 
C)  would tend to collapse from excessive debt once a majority of voters discovered they could vote themselves benefits at the expense of others. 
D)  would lead to persistent government surpluses because elected political officials would find the surpluses attractive relative to budget deficits. 
A)  would survive indefinitely into the future once it was established. 
B)  was the only form of government that would be able to control excessive government spending financed by debt. 
C)  would tend to collapse from excessive debt once a majority of voters discovered they could vote themselves benefits at the expense of others. 
D)  would lead to persistent government surpluses because elected political officials would find the surpluses attractive relative to budget deficits.

Question 13

Given the current tax rate structure and promised benefit levels, persons that are currently 40 years old or younger can expect to earn approximately what real rate of return on their Social Security contributions?

Accepted Answer

A)  0 percent 
B)  2 percent 
C)  10 to 12 percent 
D)  15 to 20 percent 
A)  0 percent 
B)  2 percent 
C)  10 to 12 percent 
D)  15 to 20 percent

Question 14

Many investment banks quickly collapsed when the housing market collapsed because

Accepted Answer

A)  the Federal Reserve was unwilling to provide them with short-term loans. 
B)  they ignored the risk assigned by the rating agencies, resulting in leverage ratios that were too low. 
C)  new regulations required investment banks to maintain more capital against their residential housing loans than was true for commercial business loans. 
D)  they were highly leveraged and had little reserves on hand to meet the short-term debt obligations of the mortgage-backed securities. 
A)  the Federal Reserve was unwilling to provide them with short-term loans. 
B)  they ignored the risk assigned by the rating agencies, resulting in leverage ratios that were too low. 
C)  new regulations required investment banks to maintain more capital against their residential housing loans than was true for commercial business loans. 
D)  they were highly leveraged and had little reserves on hand to meet the short-term debt obligations of the mortgage-backed securities.

Question 15

Between 2001-2005,

Accepted Answer

A)  both sub-prime and adjustable rate mortgages decreased as a share of the total. 
B)  both sub-prime and adjustable rate mortgages increased as a share of the total. 
C)  sub-prime loans increased, but adjustable rate loans decreased as a share of the total. 
D)  sub-prime loans decreased, but adjustable rate loans increased as a share of the total. 
A)  both sub-prime and adjustable rate mortgages decreased as a share of the total. 
B)  both sub-prime and adjustable rate mortgages increased as a share of the total. 
C)  sub-prime loans increased, but adjustable rate loans decreased as a share of the total. 
D)  sub-prime loans decreased, but adjustable rate loans increased as a share of the total.

Question 16

Which of the following is an important lesson that can be drawn from the experience of the Great Depression?

Accepted Answer

A)  Frequent shifts in monetary policy can help smooth out unstable economic conditions during a recession. 
B)  Trade restrictions can "save jobs" and expand total employment during an economic downturn. 
C)  The good intentions of political decision-makers are no substitute for sound policy. 
D)  The federal government should always balance its budget during a recession. 
A)  Frequent shifts in monetary policy can help smooth out unstable economic conditions during a recession. 
B)  Trade restrictions can "save jobs" and expand total employment during an economic downturn. 
C)  The good intentions of political decision-makers are no substitute for sound policy. 
D)  The federal government should always balance its budget during a recession.

Question 17

In the main chorus of the Keynes-Hayek rap lyrics, Keynes states "I want to steer markets" and Hayek replies, "I want them set free."  These statements are referring to

Accepted Answer

A)  the tendency of Keynesians to favor government intervention and central planning and the tendency of Hayekians to favor free markets. 
B)  the tendency of Keynesians to favor restrictive fiscal policy and the tendency of Hayekians to favor expansionary fiscal policy. 
C)  the tendency of Keynesians to favor budget deficits and the tendency of Hayekians to insist on budget surpluses. 
D)  the tendency of Keynesians to favor fiscal policy and of Heyekians to favor monetary policy. 
A)  the tendency of Keynesians to favor government intervention and central planning and the tendency of Hayekians to favor free markets. 
B)  the tendency of Keynesians to favor restrictive fiscal policy and the tendency of Hayekians to favor expansionary fiscal policy. 
C)  the tendency of Keynesians to favor budget deficits and the tendency of Hayekians to insist on budget surpluses. 
D)  the tendency of Keynesians to favor fiscal policy and of Heyekians to favor monetary policy.

Question 18

Historically, when a diverse set of stocks is held over a lengthy time period, stocks have yielded a ____ rate of return, and the variation in the rate of return has been ____.

Accepted Answer

A)  low; low 
B)  low; high 
C)  high; low 
D)  high; high 
A)  low; low 
B)  low; high 
C)  high; low 
D)  high; high

Question 19

How have the size and functions of government in the United States changed during the last century?

Accepted Answer

During the last century, government has

Question 20

Which of the following was the result of Fannie Mae and Freddie Mac being both privately-owned and government-sponsored enterprises?

Accepted Answer

A)  Their government sponsorship increased their cost of acquiring loanable funds. 
B)  They were unable to earn profits and pay dividends to their shareholders. 
C)  Congressional regulations exerted little or no impact on their business operations. 
D)  Their activities were more susceptible to political influence and favoritism. 
A)  Their government sponsorship increased their cost of acquiring loanable funds. 
B)  They were unable to earn profits and pay dividends to their shareholders. 
C)  Congressional regulations exerted little or no impact on their business operations. 
D)  Their activities were more susceptible to political influence and favoritism.

The strong demand for housing, rising housing prices, and a construction boom from 2000 to 2005 were a result of

Which of the following best explains why the Social Security system will face financial difficulties in the future?

Which of the following is an implication of the random walk theory?

Demographic conditions

Which of the following was true with regard to the Great Depression?

As short-term interest rates began to rise in 2005, which one of the following mortgage loan categories experienced the largest increase in default and foreclosure rates?

Which of the following about stocks and bonds is true?

Measured as a share of GDP, the total government expenditures of the United States are

The variation in the rate of return one can expect from ownership of stocks will generally be smaller if

The Social Security retirement program is financed by a 10.6 percent payroll tax that applies to earnings up to an income cutoff that is adjusted upward annually by the growth rate of nominal wages. As of 2016, the income cutoff was

High marginal tax rates, such as those instituted during the Great Depression, will

The 18^th century Scottish philosopher Alexander Tytler argued that democracy

Given the current tax rate structure and promised benefit levels, persons that are currently 40 years old or younger can expect to earn approximately what real rate of return on their Social Security contributions?

Many investment banks quickly collapsed when the housing market collapsed because

Between 2001-2005,

Which of the following is an important lesson that can be drawn from the experience of the Great Depression?

In the main chorus of the Keynes-Hayek rap lyrics, Keynes states "I want to steer markets" and Hayek replies, "I want them set free." These statements are referring to

Historically, when a diverse set of stocks is held over a lengthy time period, stocks have yielded a rate of return, and the variation in the rate of return has been .

How have the size and functions of government in the United States changed during the last century?

Which of the following was the result of Fannie Mae and Freddie Mac being both privately-owned and government-sponsored enterprises?

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

The strong demand for housing, rising housing prices, and a construction boom from 2000 to 2005 were a result of

Which of the following best explains why the Social Security system will face financial difficulties in the future?

Which of the following is an implication of the random walk theory?

Demographic conditions

Which of the following was true with regard to the Great Depression?

As short-term interest rates began to rise in 2005, which one of the following mortgage loan categories experienced the largest increase in default and foreclosure rates?

Which of the following about stocks and bonds is true?

Measured as a share of GDP, the total government expenditures of the United States are

The variation in the rate of return one can expect from ownership of stocks will generally be smaller if

The Social Security retirement program is financed by a 10.6 percent payroll tax that applies to earnings up to an income cutoff that is adjusted upward annually by the growth rate of nominal wages. As of 2016, the income cutoff was

High marginal tax rates, such as those instituted during the Great Depression, will

The 18th century Scottish philosopher Alexander Tytler argued that democracy

Given the current tax rate structure and promised benefit levels, persons that are currently 40 years old or younger can expect to earn approximately what real rate of return on their Social Security contributions?

Many investment banks quickly collapsed when the housing market collapsed because

Between 2001-2005,

Which of the following is an important lesson that can be drawn from the experience of the Great Depression?

In the main chorus of the Keynes-Hayek rap lyrics, Keynes states "I want to steer markets" and Hayek replies, "I want them set free." These statements are referring to

Historically, when a diverse set of stocks is held over a lengthy time period, stocks have yielded a ____ rate of return, and the variation in the rate of return has been ____.

How have the size and functions of government in the United States changed during the last century?

Which of the following was the result of Fannie Mae and Freddie Mac being both privately-owned and government-sponsored enterprises?

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

The 18^th century Scottish philosopher Alexander Tytler argued that democracy

Historically, when a diverse set of stocks is held over a lengthy time period, stocks have yielded a rate of return, and the variation in the rate of return has been .