Exam 5: Economic Activity

Leading indicators have the following properties:

A federal deficit will always expand the money supply.

It is possible for any gain in real GDP to be completely offset by the rate of inflation.

During President Reagan's first term, the three-year tax cut and negotiated cuts in government spending reduced inflation dramatically and sparked growth in the GDP, but also boosted the federal deficit to record levels.

The Federal Reserve Board of Governors controls money supply and interest rates through its monetary policy.

The U.S. government has had only ten years between 1977 and 2007 where a surplus occurred because government revenues were greater than expenditures.

Capacity utilization measures current manufacturing output against potential output. Which of the following statements is correct?

Gross Domestic Product (GDP) measures the worldwide production of all U.S. companies, firms, and enterprises.

It is estimated that manufacturing accounts for about than 20% of the GDP.

In order to stimulate the economy out of the 2008-2010 recession, the Federal Reserve Board:

Leading indicators tend to give longer warnings before peaks than troughs.

When the dollar increases relative to foreign currencies, foreign goods become more expensive, and consumers spend less money on imports.

The quantity theory of money holds that, as the supply of money increases relative to the demand for money, people will adjust their portfolios of assets by adding:

Purchasing securities in open-market operations by the Federal Reserve has the same effect as increasing reserve requirements.

Past information can be extrapolated into the future to provide an accurate forecast.

The composite index of leading indicators has shown little variation in its ability to predict.

The first step in any stock valuation is

The most widely used tool of the Federal Reserve is:

What is the difference between real GDP and inflation-adjusted GDP?

Fiscal policy concerns the implementation of the government's