[04.02]You are a member of Congress discussing the minimum wage. Unemployment is rising out of control and applications for government assistance are at an all-time high. The public demands immediate action. To address their concerns, you should recommend

postponing the issue to see if conditions improve without intervention.

keeping the minimum wage at its current level.

lowering the minimum wage.

raising the minimum wage.

Question 2(Multiple Choice Worth 3 points)

[04.02]

In the diagram above, what will happen if the government sets the price for potatoes at point B?

There will be a shortage of potatoes.

There will be a surplus of potatoes.

The price of potatoes will rise to meet equilibrium.

The price of potatoes will fall to meet equilibrium.

Question 3(Multiple Choice Worth 3 points)

[04.02]

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.

Question 4(Multiple Choice Worth 3 points)

[04.02]

In the diagram above, what will happen if the government sets the minimum wage at point A?

The minimum wage will rise to meet equilibrium.

The minimum wage will fall to meet equilibrium.

There will be a surplus of workers.

There will be a shortage of workers.

Question 5(Multiple Choice Worth 3 points)

[04.04]

Use this image to answer the following question. When the economy is operating at point B, the Federal Reserve is most likely to follow

expansionary fiscal policy.

contractionary fiscal policy.

expansionary monetary policy.

contractionary monetary policy.

Question 6(Multiple Choice Worth 3 points)

[04.04]Lowering the discount rate can promote full employment because

employees are more likely to apply for multiple jobs.

employees are able to get better offers for hourly wages.

companies are more likely to expand and hire more workers.

companies are less likely to sign up employees for unemployment insurance.

Question 7(Multiple Choice Worth 3 points)

[04.04]

Use this image to answer the following question. When the economy is operating at point C, the Federal Reserve may decrease the discount rate to

decrease inflation.

increase inflation.

decrease growth.

increase growth.

Question 8(Multiple Choice Worth 3 points)

[04.04]Reducing the discount rate is an example of

expansionary fiscal policy.

contractionary fiscal policy.

expansionary monetary policy.

contractionary monetary policy.

Question 9(Multiple Choice Worth 3 points)

[04.01]Which stage of the business cycle has the highest inflation rate?

expansion

peak

contraction

trough

Question 10(Multiple Choice Worth 3 points)

[04.01]A graph of the business cycle over time most resembles a

roller coaster.

flat plain.

ladder.

circle.

Question 11(Multiple Choice Worth 3 points)

[04.01]The inflation rate is increasing and unemployment is decreasing. The economy is likely in

recession.

expansion.

a peak.

a trough.

Question 12(Multiple Choice Worth 3 points)

[04.01]The inflation rate is decreasing and unemployment is rising. The economy is likely in

recession.

expansion.

a peak.

a trough.

Question 13(Multiple Choice Worth 3 points)

[04.01]Imagine that the unemployment rate increases to record levels. The economy is in

recession.

expansion.

a peak.

a summit.

Question 14(Multiple Choice Worth 3 points)

[04.05]Americans that support a balanced budget amendment believe it will

stabilize the economy.

end American greed.

help other countries.

end American poverty.

Question 15(Multiple Choice Worth 3 points)

[04.05]Which group best describes to whom the United States owes billions of dollars in debt to

government officials

bank owners

entrepreneurs

investors

Question 16(Multiple Choice Worth 3 points)

[04.05]When a government spends more money in one year than it collects in taxes, there is a budget

debt.

deficit.

surplus.

reversal.

Question 17(Multiple Choice Worth 3 points)

[04.05]You are a representative to the U.S. Congress. The U.S. federal budget debt grew by one billion dollars each of the last five years. To correct this, you should support the budget that

increases spending for health care, education, and defense.

decrease spending and/or increase income taxes to eliminate the deficit.

decreases corporate taxes in the health industry.

decreases income taxes to eliminate the surplus.

Question 18(Multiple Choice Worth 3 points)

[04.03]You have an account with Bank of America®. What is your bank’s role in the Federal Reserve?

Non-member Depository Institution

Federal Open Market Committee

Federal Reserve Regional Bank

Member Bank

Question 19(Multiple Choice Worth 3 points)

[04.03]You have an account with Wells Fargo®. You cashed a check from your job on payday and requested newly minted currency. What Federal Reserve structure provides new currency to your bank?

Federal Open Market Committee

Federal Reserve Regional Bank

Board of Governors

Member Bank

Question 20(Multiple Choice Worth 3 points)

[04.03]Meetings of Federal Reserve officials occur in

Boston.

New York.

Washington, D.C.

Chicago.

Question 21(Multiple Choice Worth 3 points)

[04.03]The Federal Reserve includes twelve

governing bodies.

regional banks.

member offices.

city officials.

Question 22(Multiple Choice Worth 3 points)

[04.03]Credit unions are

member banks of the Federal Reserve.

regional banks of the Federal Reserve.

obligated to follow Federal Reserve regulations.

participants in the Federal Open Market Committee.

Question 23(Multiple Choice Worth 3 points)

[04.02]An example of a natural monopoly product is

electricity service.

an automobile.

a grocery store.

gasoline.

Question 24(Multiple Choice Worth 3 points)

[04.02]The state legislature asks you to analyze several product markets for natural monopoly qualities. The legislature wishes to regulate one of the products to provide safer, more efficient, and standard quality to its citizens. Which product do you recommend?

student tutoring services

bottled water plants

auto detailing services

paint manufacturing

Question 25(Multiple Choice Worth 3 points)

[04.02]An example of a natural monopoly product is

a hair salon.

a board game.

airplane manufacturing.

highway construction.

Question 26(Multiple Choice Worth 3 points)

[04.02]The best reason to regulate purification of the water supply is to

give the government control over a basic public good.

ensure the safety of the public’s drinking water.

build as many purification plants as possible.

increase the salary for the workers.

Question 27(Multiple Choice Worth 3 points)

[04.04]You are a member of Congress and your aide reports that unemployment continues to rise. You are due to report to the floor to vote on several bills. To address their concerns, you should recommend to vote for the proposed bill that aims to

increase spending on grants for small businesses.

increase taxes on large corporations.

regulate unemployment offices.

regulate cell phone towers.

Question 28(Multiple Choice Worth 3 points)

[04.05]To promote economic growth, countries would most likely act so that inflation

is eliminated.

remains at a high level.

remains at a low level.

is a negative number.

Question 29(Multiple Choice Worth 3 points)

[04.05]Increasing government spending usually

increases the unemployment rate.

decreases the unemployment rate.

increases the stagflation rate.

decreases the stagflation rate.

Question 30(Multiple Choice Worth 3 points)

[04.05]The economy is in a severe recession. The government should

end fiscal policy.

increase spending.

increase taxes.

end monetary policy.

Question 31(Essay Worth 10 points)

[04.04]Respond to the following question in at least a complete paragraph of three to five sentences.

Housing sales are dropping and many worry this is a sign that the economy is heading into a recession. Discuss an example of how the Federal Reserve may use a tool of monetary policy in this situation and explain the goals of using the tool.

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