Question 1: When the government has a budget deficit or surplus, it enters the __________.

A. market for loanable funds

B. subprime housing market

C. bond market

D. government-sponsored mortgage lenders market

Question 2: An increase in the capital stock will __________.

A. shift the production function downward

B. shift the production function upward

C. flatten the production function

D. steepen the production function

Question 3: Fluctuations in the demand and supply of loanable funds will in turn bring changes to the __________ of lent and borrowed funds.

A. product recipient

B. mortgage-backed securities

C. equilibrium quantity

D. equilibrium quality

Question 4: Nations with low levels of GDP per capita may converge to richer nations if __________.

A. nations with high levels of income experience a continuously increasing growth rate

B. nations with lower levels of income grow more quickly than those with higher levels of income

C. nations with lower levels of income spend less on investment

D. nations with lower levels of income grow more slowly than those with higher levels of income

Question 5: If the government __________ taxes to pay for spending on infrastructure, the result will most likely be a(n. __________ in capital deepening.

A. increases; increase

B. decreases; increase

C. increases; decrease

D. eliminates; elimination

Question 6: Good news for the economy is bad news for bond prices, because __________.

A. the increased demand for money will increase interest rates

B. when real GDP increases, demand for money will decrease

C. bond prices move in the same direction as interest rates

D. when interest rates increase during growing GDP, bond prices will increase

Question 7: Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to answer the following two question(s.. Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom. Some economists noticed that the change in the value of the U.S. dollar was largely due to the change in interest rates, and the change in interest rates occurred because of the Fed's use of __________ to further stimulate the economy.

A. open market sales

B. quantitative easing

C. discount operations

D. open market purchases

Question 8: Which one of the following statements is true?

A. Demand deposits are assets of a bank.

B. A bank's assets plus its liabilities equals must equal zero.

C. A bank's reserves can only be kept as cash in its vault.

D. Assets generate income for a bank.

Question 9: An open market __________ by the Fed decreases the money supply, which leads to __________ interest rates and a fall in investment spending.

A. sale; increased

B. sale; decreased

C. purchase; increased

D. purchase; decreased

Question 10: The Fed can change the money supply by buying or selling long-term Treasury bonds. Purchasing long-term securities is commonly called __________.

A. open market operations

B. discount operations

C. federal funds speculation

D. quantitative easing

Question 11: Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to answer the following two question(s.. Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom. According to this scenario, some economists noticed that the U.S. dollar __________ largely because monetary policy in the United States had driven interest rates __________.

A. depreciated; down

B. depreciated; up

C. appreciated; down

D. appreciated; up

Question 12: All of the following statements are true of the Federal Reserve EXCEPT __________.

A. it acts as the central bank for all countries in the world

B. along with the Board of Governors, the chairperson of the Federal Reserve determines monetary policies and strategies based on the state of economy

C. it supplies currency to the economy

D. it holds reserves from banks and regulates banks