Question 21:

The asset-liability time mismatch, which can cause severe problems for a bank, refers to the possibility forcustomers towithdraw a bank's liabilities _____________________ while customers repay its assets __________________.

Select the correct answer below:

a) at a predictable and consistent rate over time; at an unpredictable and inconsistent rate over time

b) in the longterm;in the shortterm

c) in the short term;in the long term

d) in small amounts; in large amounts

Question 22:

Suppose that the reserve requirement in an economy is 0.10 and the total amount of excess reserves is 600billion. What is the maximum possibletotal change in the money supply?

Provide your answer below:

Question 23:

Determining whether to raise or lower the Federal Funds Rateis a responsibility of __________.

Select the correct answer below:

a) the central bank

b) the credit unions

c) the government

d) the commercial banks

Question 24:

A lender of last resort isan institution that _________________________.

Select the correct answer below:

a) provides short-term emergency loans in conditions of financial crisis.

b) provides loans to banks that meet its strict lending standards regardless of the situation

c) provides long-term loans to banks, businesses, and the government for development projects

d) is there to help the government when it needs money urgently

Question 25:

A situation in which depositors race to the bank to withdraw their deposits for fear that otherwise those deposits would be lost is called __________.

Select the correct answer below:

a) a bank run

b) a bank dissolution

c) a bank failure

d) marginal cost of banking

Question 26:

Which of the following actions by the Fed will decrease the Federal Fund rate and increase the money supply?

Select the correct answer below:

a) The Fed buys US government securities

b) The Fed sells US government securities

c) The Fed raises the discount rate

d) The Fed lowers the discount rate

Question 27:

When the Fed carries out contractionary monetary policy through selling bonds __________.

Select the correct answer below:

a) it reduces the supply of loanable funds which raises the interest rate

b) it reduces the supply of loanable funds which lowers the interest rate

c) it increasesthe supply of loanable funds which lowers the interest rate

d) it increasesthe supply of loanable funds which increases the interest rate

Question 28:

Quantitative easing is ______________.

Select the correct answer below:

a) the purchase of long-term government and private mortgage-backed securities by central banks to make credit available in hopes of stimulating aggregate demand

b) the rule that the central bank must react if the inflation rate deviates from 2%.

c) the buying or selling of U.S. Treasury bonds by the central bank to implement monetary policy

d) the process of moving in the opposite direction of the business cycle of economic downturns and upswings

Question 29:

Which of the following formulas is the quantity equation of money?

Select the correct answer below:

a) Money Supplyreal GDP=VelocityPrice Level

b) Money SupplyVelocity=Price LevelReal GDP

c) Money SupplyPrice Level=VelocityReal GDP

d) none of the above

Question 30:

Assuming a stable velocity and a real GDP below the potential levels (recessionary gap), according to thequantity equation of money, what results from an increase in the money supply?

Select the correct answer below:

a) increase in both the price level and real GDP

b) only inflation

c) only an increase in real GDP

d) the recession deepens

Question 31:

Using the quantity equation of money MV=PQ,calculate the price level (P) if the money supply (M) is 1000, velocity (V) equals 2, and the real GDP (Q) equals 200.

Select the correct answer below:

a) 1500

b) 3.5

c) 45

d) 10

Question 32:

What kind of federal income tax is characterized bythe percentage of income tax paid increases in proportion to increasing income?

Select the correct answer below:

a) Regressive

b) Progressive

c) Proportional

d) Flat

Question 33:

Government spending and tax policy are both tools of fiscal policy.

1. true

2. false

Question 34:

Automatic stabilizer are programs that automatically____________aggregate demand in a recession and ___________ aggregate demand in a potentially inflationary boom.

Select the correct answer below:

a) reduce, hold down

b) reduce, stimulate

c) stimulate, hold down

d) stimulate, prop up

Question 35:

Once the government passes a bill to respond to a recession,it takes some time to disperse the funds to the appropriate agencies to start the programs. Economists call this time to start the projects the _________________.

Select the correct answer below:

a) legislative lag

b) recognition lag

c) implementation lag

d) effectivenesslag

Question 36:

What is aneffectof a temporary tax cut?

Select the correct answer below:

a) It will be less impactful than a permanent tax cut.

b) It will be more impactful than a permanent tax cut.

c) It has the same impact as a permanent tax cut.

d) A temporary tax cut has no effects on the economy.

Question 37:

What effect would a perpetually balanced budget have on automatic stabilizers?

Select the correct answer below:

a) they would work in excess and cause large economic fluctuations

b) they would not work and economic fluctuations would worsen

c) their effects would be cancelled out

d) the budget would replace the automatic stabilizers, performing the same work