Study Guide for Test #3: Econ 1010

Chap. 12, 13, & 14

1. When a person buys a stock on a stock exchange they are participating in ! Stock Market 2. The Financial Crisis of 2008 affected ! affected all aspect of Economy 3. Throughout the history of the U.S., until the creation of the Federal Reserve System in 1913, the monetary system was ! The federal Reserve manipulation of the man supply 4.When you use dollar bills to pay for a purchase at a store, money is serving which function? ! medium of exchange 5.If the reserve ratio is 10% and a new demand deposit of $10,000 is made, what is the maximum deposit creation possible? ! $9,000 6.M1 includes ! Currency, coins in circulation non bank, traveler checks, demand deposit 7.Banks make loans from their ! Excessive reserves 8.Which of the following is among the assets of a commercial bank? ! Loans and investment 9.Who controls the aggregate volume of demand deposits in the banking system? ! Federal Reserve or FED 10.When a central bank wants to increase the money supply, it ! selling government 11. The Federal Open Market Committee (FOMC) is highly concerned with ! The supply of reserve by banks 12. When the Fed increases the money supply, it generally has the effect of ! Decrease 13. Many large banks and Wall Street investment rms got into nancial problems due to ! Loosing toan investment 14. Each of the following is a nancial intermediary except ! Federal 15. Historically, many commercial banks began as ! Investment bank or retail bank 16.An auto factory worker who is unemployed because a robot now has his job is a victim of ! Structural unemployment 17.People who are in the process of changing jobs are classied in the category of ! Unemployed 18.The unemployment rate will not fall to zero because of ! Frictional

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Study Guide for Test #3: Econ 1010

Chap. 12, 13, & 14

19.When General Motors lays workers off because of a decrease in aggregate demand, it causes ! Cyclical unemployment 20.Which of the following best describes when the economy is experiencing ination? When ! The efciency effects of ination 21.If the consumer price index is 100 in 2007 and is 120 in 2009, then the rate of ination between 2007 and 2009 is ! 20% 22.If ination causes the demand for houses to increase more rapidly than the demand for other goods, the economy has experienced which effect of ination? ! Equity 23. Investment spending is sensitive to ! Financial markets 24. A trade decit will occur in an economy ! imports out weigh exports 25.A useful measure of the size of the workforce, that is, the number of individuals who are willing and able to work, is ! Labor force participatior 26.In an economy like that of the US, due to a variety of institutional and social factors, wages tend to be ! High wage ( shicky ) 27.The fears of people concerning distribution of taxes are related to ! Size of government and distribution of taxes 28.Total government expenditures represent approximately what fraction of GDP? ! 33%! maginal benets are equal to marginal cost 29.A cash payment from the government to an individual, based on need, is an example of a ! Transfer payment 29.A payment from the government to a federal employee is a ! purchases 30.Public goods and services have characteristics that make them ! None 31.The size of government is growing at ! Money expenditures, receipts 32.A national crime lab used to prevent criminal activity nationwide is an example of a ! Public good 33.Tax equity means that ! Creating a sense of balance of society 34.Where marginal benets are greater than the marginal costs, government expenditures should ! Be increase
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Study Guide for Test #3: Econ 1010

Chap. 12, 13, & 14

35.Which of the following is an example of a public good or service? ! Space exploration

36.A progressive tax rate means that the ratio of tax collections to income ! Rate of taxation rises as income increases 37.In the US, major sources of tax revenues are: ! Corporate income safes and excise property - personal income taxes 38.The ability to pay the principle of taxation suggests that people with more income should pay more taxes. This means that ! Progressive 39.The gasoline tax is often used to illustrate the benets received principle of taxation because ! Out put 40.The US federal personal income tax is an example of a(n) ! Progressive tax rate 41.At the federal level, the largest revenue generating tax is the ! Individual tax 42.Suppose one individual earns $25,000 per year and another individual earns $15,000 per year. If the individual earning $25,000 per year pays $750 more per year in taxes than the person earning $15,000, this is an illustration of ! Horizontal equity 44.Which of the following countries has the lowest taxes collected (as a percent of GDP)? ! U.S. 45.Enforcement and collection of personal income taxes is the responsibility of the ! IRS! 46.The federal government uses taxes to ! Transfer payment and government purchases 47.The federal government ended its most recent period of budget surpluses and returned to decits in ! 2002 (a few of the above will be eliminated to get down to approx. 40 questions)

Plus you will have an opportunity to ll in the blanks on a Circular Flow diagram.

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