1. The circular flow model captures the total ___________________ of an economy.

a. income

b. neither income nor output.

c. both income and output

d. output

2. If the Fed's policy is contractionary, it will ______________________________.

a. use open market operations to buy Treasury bills

b. lower the discount rate

c. use open market operations to sell Treasury bills

d. lower the reserve requirement

3. It is not possible for a country to have total government debt that is greater than total GDP.

True

False

4. The United States Federal Reserve _________________________.

a. sets the Fed Funds target rate

b. set tax rates

c. sets the market interest rate by fiat

d. is not charged with worrying about inflation

e. is in charge of issuing treasury securities to fund the government debt

5. If China can return to high single-digit real growth rates for the long-term, approximately how long will it take for the standard of living in China to double?

a. ~ 70 years

b. < 10 years

c. ~ 140 years

d. ~ 35

6. To understand structural unemployment in an economy, the __________ must also be considered in addition to the unemployment rate.

a. Cyclical unemployment

b. Labor participation rate

c. Inflation rate

d. Frictional unemployment

7. Poorly timed discretionary macroeconomic policy can do more harm than good. Timing is usually a larger concern with _______ policy than it is with _______ policy.

a. expansionary; contractionary

b. contractionary; expansionary

c. monetary; fiscal

d. fiscal; monetary

e. none of these answers. It is similarly difficult to get the timing right for both fiscal and monetary policy.