(TCO 5) Rising business investment and consumption will (Points:

1. (TCO 5) Rising business investment and consumption will (Points: 5)increase aggregate demand increase aggregate supplynot change aggregate demandNone of the above2. (TCO 6, 10) The "crowding-out effect" will result in (Points: 5)an increase in private business investment. a decrease in private business investment. an increase in consumers' consumption. a decrease in federal debts 3. (TCO 6, 10) The effectiveness of discretionary fiscal policy will be reduced if: (Points: 5)borrowing increases interest rates and crowds out private investment the dollar depreciates because of an increased outflow of currency the price level falls stock prices rise 4. (TCO 6, 10) The 'crowding-out effect' of borrowing to finance an increase in government expenditures: (Points: 5)reduces current spending for private investment. increases the income inequality in the U.S. reduces the economic burden on future generations. decreases the need for U.S. securities. 5. (TCO 6, 10) An increase in taxes and cut in government spending would be appropriate to curb (Points: 5)demand-pull inflation recession rising interest rates fiscal deficits 6. (TCO 6, 10) The primary benefit of using budget surpluses to pay down the public debt is: (Points: 5)a lower interest rate, leading to higher investment spending an improved balance of trade lower tax rates in the future a higher international value of the dollar 7. (TCO 5, 6) Suppose the equilibrium level of income exceeds the full employment level of income and there is high inflation. Hence, the government decides to implement a fiscal policy that will act to reduce national output and prices. This can be accomplished by (Points: 5)increasing government spending such that aggregate expenditures are increased. raising taxes and government spending by the same amount such that aggregate supply is decreased and aggregate demand is increased. decreasing government spending such that aggregate demand is reduced. lowering average tax rates such that aggregate supply is increased. increasing transfer payments such that aggregate expenditures decline. 8. (TCO 6, 10) Which statement is true about fiscal policy? (Points: 5)Government must manipulate its spending and taxes. Fiscal policy is legally vested in the President; Congressional interference prevented it from being effective. Although fiscal policy hasn't always been right, it is quickly formulated and put into effect very fast. None of these is true 9. (TCO 7, 10) U.S. Federal Reserve's Monetary policy would not include (Points: 5)increasing interest rates to control the money supply a policy directed toward controlling credit reducing the money supply in an effort to control inflation increasing tax rates in an effort to control inflation 10. (TCO 7, 10) The Federal Reserve decides to pursue an 'expansionary monetary policy.' Which set of actions by the Fed would be most consistent with this policy? (Points: 5)buying government securities and raising the reserve ratio selling government securities and raising the reserve ratio buying government securities and lowering the reserve ratio a decrease in commercial bank loans selling government securities and lowering the reserve ratio 11. (TCO 5, 6, 10) When government tax revenues change automatically and in a countercyclical direction over the course of the business cycle, this is an example of (Points: 5)the political business cycle automatic stabilizers The full-employment budget Crowding-out effect 12. (TCO 5, 6, 10) During time of a big booming economy, we want to (Points: 5)lower taxes and run budget deficits reduce social expenditures raise taxes and reduce government spending lower taxes and raise government spending 13. (TCO 5, 6, 10) Budget deficits are most appropriate during (Points: 5)inflations hyperinflations long recessions very brief deflations 14. (TCO 5, 6, 10) Government spending can be financed by all of the following "except" (Points: 5)personal income taxes investment spending government borrowing money creation excise taxes 15. (TCO 8) A person has a 'comparative advantage' in producing a good if (Points: 5)that person can produce the good at a lower absolute cost than anyone else. that person can produce the good at a lower opportunity cost than anyone else. that person can do a better job than anyone else. that person spends less money in out-of-pocket expenses than anybody else. 16. (TCO 8) 'Absolute advantage' is found by (Points: 5)comparing opportunity costs. calculating the dollar cost of production. comparing the productivity of one nation to that of another. first determining which country has a comparative advantage. 17. (TCO 9) If the U.S. dollar is stronger than the French euro, U.S. exports to France (Points: 5)and French exports to the United States rise. and French exports to the United States fall. rise, and French exports to the United States fall. fall, and French exports to the United States rise. 18. (TCO 9) If the worldwide demand for dollars relative to all other currencies increases, then the value of the dollar in terms of any other currency: (Points: 5)Increase and the dollar will appreciate Increase and the dollar will depreciate Decrease and the dollar will appreciate Decrease and the dollar will depreciate 19. (TCO 8, 9) Frank gets a job because the foreign demand for the product his firm produces rose. This is a result of the U.S. dollar: (Points: 5)Being weak relative to other nation's currencies. Appreciating relative to other currencies. Being targeted by the IMF for inflation. none of the above 20. (TCO 8, 9) A statement for a nation of its annual balance of exports of goods and services minus its imports of goods and services together with net unilateral transfers represents (Points: 5)Capital Account Current Account Basic Balance Official Reserve Transactions Account