When the economy changes, the "sticky wages" argument suggests which of the following?

a.

Wages are not related to a positively or negatively changing economy

b.

Wages decline when the economy declines but remain fixed when it improves

c.

Wages adjust slowly upwards to a changing economy, but they rarely decrease

d.

Wages tend to adjust freely in accordance with positive and negative economic changes

Question32

Fiat money is backed by which of the following?

a.

Bartering arrangements

b.

Precious metals such as gold

c.

The international exchange of automobiles

d.

The public's trust in the government and economic system

Question33

Money creation is the increase in the supply of money. In the United States, this results from which of the following?

a.

The rise in the value of gold held and owned by the US Government

b.

The process of multiple deposits held in a fractional reserve banking system

c.

The actions of a single commercial bank buying additional government securities

d.

The purchases of government securities by commercial banks and financial institutions

Question34

Which of the following statements is most precise in describing the money creation process?

a.

Money is created through multiple deposit expansion in direct relation to the federal funds rate

b.

Money is created through multiple deposit expansion in direct relation to the reserve requirement ratio

c.

Money is created through multiple deposit contraction in direct relation to the government's printing of new dollar bills

d.

Money is created through multiple deposit contraction in direct relation to the government's shredding of old dollar bills

Question35

Which of the following lists some of the functions of the U.S. Federal Reserve system?

a.

Take deposits from customers and issue individual and business loans

b.

Design, pass, and implement laws related to the United States financial system

c.

Set the government's budget and manage budget deficits, and the national debt

d.

Regulate banks, set monetary policy, and maintain the stability of the financial system

Question 36

Monetary policy involves which of the following?

a.

Automatic stabilizers taking effect

b.

Congress's spending and taxing activities

c.

Making adjustments in the supply of money

d.

Periodic issue of government financial instruments such as Treasury bills

Question37

Which of the following scenarios shows an appropriate use of a monetary policy tool by the Fed in order to help the economy?

a.

The Fed is concerned about high inflation, so it lowers the federal funds rate

b.

A sustained inflation rate of 2% prompts the Fed to increase the discount rate

c.

A high unemployment rate prompts the Fed to lower the reserve requirement ratio

d.

The economy is in a recession, so the Fed sells government securities in the bonds market

Question38

Holding all else constant, expansionary monetary policy results in which of the following outcomes?

a.

A decrease in the price of bonds and a decrease in the interest rate

b.

A decrease in the price of bonds and an increase in the interest rate

c.

An increase in the price of bonds and a decrease in the interest rate

d.

An increase in the price of bonds and an increase in the interest rate

Question39

Suppose that the value of the Dollar relative to the Euro decreases. Which of the following accurately represents the effect of this change in the foreign exchange rate on the domestic economy?

a.

The cheaper Euro makes our exports appear more expensive, thus, our net exports decrease

b.

The Euro is now more expensive for U.S. buyers, therefore, capital inflows to Europe decrease

c.

The U.S. dollar is more expensive relative to the Euro, so Europeans purchase more European financial assets

d.

The cheaper U.S. dollar makes U.S. goods more attractive Europeans, therefore our exports increase and our imports decrease

Question40

Which of the following describes a demand curve for money?

a.

The curve has a negative slope, and is drawn with the interest rate on the vertical axis and the quantity of money on the horizontal axis

b.

The curve has a negative slope, and is drawn with the quantity of money on the vertical axis and the interest rate on the horizontal axis

c.

The curve has a positive slope, and is drawn with the interest rate on the vertical axis and the quantity of money on the horizontal axis

d.

The curve has a positive slope, and is drawn with the quantity of money on the vertical axis and the interest rate on the horizontal axis