1. In the circular flow diagram

Select one:

A. businesses pay wages, rent, interest, and profits to households in return for the use of factors of production.

B. through the factor market businesses purchase goods and services from households in return for consumption dollars.

C. through the factor market households pay wages, rent, interest, and profits to households in return for use of the factors of production.

D. households purchase goods and services from businesses in return for profits.

E. businesses sell goods and services to households in return for rent, wages, interest, and profits.

2.The main function of the Federal Reserve is to

Select one:

A. print money when needed.

B. make loans to member banks and print money.

C. determine monetary policy and monitor banks.

D. exchange money in the foreign exchange market.

E. safeguard the nation's gold supply.

3.If the Federal Reserve lowers the discount rate, how are interest rates and real GDP affected?

Interest Rates / Real GDP

Select one:

A. Increase / Decrease

B. Increase / Increase

C. Decrease / Decrease

D. Decrease / Increase

E. Decrease / No change

4.If the economy is suffering from a recession, the Federal Reserve should

Select one:

A. buy bonds and raise the discount rate.

B. buy bonds and lower the discount rate.

C. buy bonds and raise the reserve requirement.

D. sell bonds and lower the reserve requirement.

E. sell bonds and lower the discount rate.

5.The short-run Phillips Curve

Select one:

A. illustrates the relationship between interest rates and investment.

B. is a vertical line at all levels.

C. illustrates the relationship between inflation and interest rates.

D. shows an increase in unemployment when inflation increases.

E. illustrates the relationship between inflation and unemployment.

6.According to the long-run Phillips Curve

Select one:

A. an increase in unemployment occurs when inflation increases.

B. an increase in unemployment occurs when inflation decreases.

C. fiscal and monetary policies that impact aggregate demand do not impact the natural rate of unemployment.

D. fiscal and monetary policies that impact aggregate demand help increase the natural rate of unemployment.

E. fiscal and monetary policies that impact aggregate demand help decrease the natural rate of unemployment.