04.07 Module 4 Economics Exam

Question 1 (Worth 5 points) [04.02 MC] How does the government help ensure fair prices for all citizens of a particular area served by one utility company? By imposing taxes on the wealthy citizens By setting the price for utilities across the country By negotiating affordable rates with the supplier By passing legislation to prevent a monopoly Points earned on this question: 5

Question 2 (Worth 5 points) [04.02 MC] A supply and demand graph, showing quantity on the x axis from 0 to 60 in 10 unit increments. Price is on y axis from 0 to 5 in 1 unit increments. Supply line rises up and to the right from 10, 1 in positive x and y directions. Demand line descends from 10, 5 in positive x direction and negative y direction. An arrow points to the equilibrium, the convergence of supply and demand lines. The area above both the supply and demand curves is marked Surplus. The area under both the supply and demand curves is marked Shortage. A price ceiling is fixed at 1.5. Public Domain During a cold winter, there is a natural-gas shortage. The government sets a price ceiling on natural gas so that people can continue to afford heating. If the price ceiling remains in effect, what will happen? Quantity demanded will exceed the quantity supplied. Quantity demanded will equal the quantity supplied. Quantity demanded and supplied will reach price equilibrium. Quantity demanded will be lower than the quantity supplied. Points earned on this question: 5

Question 3 (Worth 5 points) [04.05 MC] The government increases taxes. What might be a reason for this change in fiscal policy? A deficit due to improving nationwide public transportation A deficit due to more monies flowing in from investors A surplus due to greater amounts of income from exports A surplus due to more government spending on building roads Points earned on this question: 5

Question 4 (Worth 5 points) [04.05 LC] When a government collects more revenue in one year than it spends, there is a budget debt deficit surplus reversal Points earned on this question: 5

Question 5 (Worth 5 points) [04.03 MC] Federal Reserve Banks directly affect the national economy by administering consumer protection laws increasing and decreasing the money supply providing oversight and services for financial institutions raising and lowering interest rates Points earned on this question: 0

Question 6 (Worth 5 points) [04.05 MC] How does the U.S. government slow economic growth? By decreasing taxes and decreasing spending By decreasing taxes and increasing spending By increasing taxes and decreasing spending By increasing taxes and increasing spending Points earned on this question: 5

Question 7 (Worth 5 points) [04.01 MC] Inflation is low but the unemployment rate is the highest seen in several years. Economists report signs that show in six months the economy is likely to improve. The economy is likely in contraction expansion a peak a trough Points earned on this question: 5

Question 8 (Worth 5 points) [04.03 LC] The Federal Reserve includes twelve governing bodies regional banks member offices city officials Points earned on this question: 5

Question 9 (Worth 5 points) [04.03 MC] Consumers benefit from Federal Reserve oversight because they entrust their money to banks and other financial institutions prefer paying fewer taxes for goods and services often borrow more money than they should want to keep prices for goods and services low Points earned on this question: 5

Question 10 (Worth 5 points) [04.01 MC] In the business cycle, when is "deflation" most likely to occur? As GDP rises During a recession During expansion With low unemployment Points earned on this question: 5

Question 11 (Worth 5 points) [04.02 MC] This image is a graph with, price, labeling the y axis and, quantity, labeling the x axis. Two curves intersect on the graph, one upward sloping and the other downward sloping. Two horizontal axes are highlighted, one above the intersection point of the curves with the label, A, and one below the intersection point of the curves with the label, B. Use this image to answer the following question. When government sets a price for a good above equilibrium, there will be economic growth economic loss a shortage a surplus Points earned on this question: 5

Question 12 (Worth 5 points) [04.02 HC] A supply and demand graph, showing quantity on the x axis and price is on y axis. Supply line rises up and to the right from 0, 0 in positive x and y directions. Demand line descends from x axis origin and upper range of y axis in positive x, negative y direction. An arrow points to the equilibrium, the intersection of supply and demand lines. The area above both the ascending and descending lines is marked A. The area to the right of both the ascending and descending lines is marked B. The area below both the ascending and descending lines is marked C. The area to the left of both the ascending and descending lines is marked D. From an Associated Press article on Venezuela dated January 22, 2008: "... troops are cracking down on the smuggling of food ... the National Guard has seized about 750 tons of food ... [President] Hugo Chàvez ordered the military to keep people from smuggling scarce items like milk ... He's also threatened to seize farms and milk plants ..." These actions were the result of a price ceiling on food. Which zone (represented by a letter) on the graph reflects this policy, and what does it create? Letter A; supply exceeds demand, resulting in a surplus Letter B; supply exceeds demand, resulting in a shortage Letter C; demand exceeds supply, resulting in a shortage Letter D; demand exceeds supply, resulting in a surplus Points earned on this question: 5

Question 13 (Worth 5 points) [04.05 HC] Which are more popular with citizens, contractionary or expansionary government actions, and why? Contractionary, because they decrease the amount of money held by the government and put more in the hands of its citizens Contractionary, because they decrease the amount of money held by the people and put more in the hands of the government Expansionary, because they increase the amount of money held by the government and put less in the hands of its citizens Expansionary, because they increase the amount of money held by the people and put less in the hands of the government Points earned on this question: 0

Question 14 (Worth 5 points) [04.04 MC] This image is a graph with, time along the x axis and, real GDP along the y axis. A horizontal wavy line extends across the graph. The highest point on the line has a label, B. The downward slope has a label, A. The lowest point on the line has a label, C. The upward slope has a label, D. Use this image to answer the following question. When the economy is operating at point C, the U.S. Congress is most likely to follow expansionary fiscal policy contractionary fiscal policy expansionary monetary policy contractionary monetary policy Points earned on this question: 0

Question 15 (Worth 5 points) [04.02 MC] This image is a graph with, price, labeling the y axis and, quantity, labeling the x axis. Two curves intersect on the graph, one upward sloping and the other downward sloping. Two horizontal axes are highlighted, one above the intersection point of the curves with the label, A, and one below the intersection point of the curves with the label, B. In the diagram above, what will happen if the government sets the price for Internet access at Point B? There will be a shortage of Internet access. There will be a surplus of Internet access. The price of Internet access will rise to meet equilibrium. The price of Internet access will fall to meet equilibrium. Points earned on this question: 5

Question 16 (Worth 5 points) [04.02 LC] Which is an example of a natural monopoly? A company that enters the market and requires new infrastructure A group of companies that own all the sources of production A milk product that is produced by multiple companies A single source for electricity in your community Points earned on this question: 5

Question 17 (Worth 5 points) [04.05 MC] Which of these is not a result of the federal government spending more than it earns? Budget deficits Budget surpluses Increased national debt Increased taxes Points earned on this question: 5

Question 18 (Worth 5 points) [04.02 MC] Why is it important for natural monopolies to exist? They help the consumer decide among several suppliers for a necessary service. They improve the economy by using materials that are native to the area. They make it more efficient to deliver necessary goods and services to consumers. They provide easy access to a variety of goods and services. Points earned on this question: 5

Question 19 (Worth 5 points) [04.04 MC] Unemployment is low and inflation is rising, but slowly. Gross Domestic Product is also rising. The Federal Reserve may increase the reserve requirement at this point in order to ensure that the growth continues at a brisk pace raise unemployment to levels that indicate a mobile workforce protect the public from the potential of inflation rising out of control encourage banks to give out more loans, fostering further economic growth Points earned on this question: 5

Question 20 (Worth 5 points) [04.04 MC] Explain how the Federal Reserve may use the discount rate and the reserve requirement to increase the money supply. What impact should these actions have on employment and why?