Question 1

Which of the statements below about the Fed is NOT true?

a.Federal Reserve banks control the money supply.

b.The Fed can loan money to private banks as lender of last resort.

c.Regional Federal Reserve banks act as central banks for their areas.

d.The Fed is controlled by the U.S. government.

Question 2

The discount rate represents which of the following?

a.It is the rate that the Fed charges member banks in order to satisfy liquidity needs.

b.It is the rate that banks charge when they lend out money.

c.It is the rate that banks charge to one another to meet the reserve requirement.

d.It is the same as the fed funds rate.

Question 3

Which of the following is the reason why individuals are more certain of the value of their currency with central banks?

a.Central banks use paper money.

b.Central banks hold money in their reserves and make loans based on this money.

c.Central banks lessen the reliance on the gold standard.

d.Central banks have tools that they use to control and stabilize the money supply.

Question 4

Which of the following is NOT a way that the government finances fiscal policy?

a.Rolling over debt

b.Printing money

c.Tax revenue

d.Sale of treasury securities

Question 5

Using the expenditure approach and the information shown here, which of the following is the calculated GDP?

Individual Purchases: $150 billion

Government purchases: $200 billion

Business investments: $300 billion

Imports: $150 billion

Exports: $100 billion

a.$900 billion

b.$750 billion

c.$850 billion

d.$600 billion

Question 6

Which of the choices below is NOT true about expansionary fiscal policy?

a.It can trigger the multiplier effect.

b.It is financed by selling treasury securities.

c.It will result in an increase in the unemployment rate.

d.It often results in government expenditures exceeding tax revenues.

Question 7

Of the following true statements, which statement might be a reason that budget deficits make interest rates go up?

a.They represent the difference between tax revenue and government expenditures.

b.Large budget deficits reduce the strength of the domestic currency.

c.Tax revenue collected to make interest payments on the debt is given to Americans who can then use it to make purchases.

d.The increased demand for loanable funds in the private market will drive interest rates up.