The state legislature asks you to analyze several product markets for natural monopoly qualities. The legislature wishes to regulate one of the products to provide safer, more efficient, and standard quality to its citizens. Which product do you recommend?

road sign construction

camping facilities

automobile sales

house cleaning

Question 2 

[04.02]An example of a natural monopoly product is

a hair salon.

a board game.

airplane manufacturing.

highway construction.

Question 3 

[04.02]Which product would be most beneficial for government to regulate?

power plant construction

computer manufacturing

furniture restoration

antique dealers

Question 4 

[04.02]The best reason to regulate bridge construction is to

ensure safety standards are met.

reduce the number of bridges the public has to fund.

eliminate multiple bridges in one area because they are not pleasing to the eye.

minimize route options because different bridges often confuse drivers.

Question 5 

[04.05]Who is responsible for making fiscal policy?

Federal Reserve

Congress

Banks

Judicial Branch

Question 6 

[04.05]Which of the following is not a goal of fiscal policy?

price stability

full employment

economic growth

increased currency

Question 7 

[04.05]Increasing taxes would be appropriate to

slow the inflation rate.

speed up the inflation rate.

create deflation.

create stagflation.

Question 8 

[04.05]The unemployment rate reflects the percentage of people

who do not have a job.

who apply for government assistance.

over age 16 who are trying but unable to find work.

over age 65 who retire but do not yet collect government benefits.

Question 9 

[04.03]Banks that are members of the Federal Reserve have the benefit of

earning dividends from stock in the Federal Reserve.

voting rights on the Federal Open Market Committee.

appointment rights to the Board of Governors.

priority access to check-clearing services.

Question 10 

[04.03]Inflation is low and unemployment is high. The public is demanding action. Within the Federal Reserve, who has the power to act?

President of the Federal Reserve Bank of New York

Supreme Governor of the Board of Governors

Leader of the National Consumers Union

Federal Open Market Committee

Question 11 

[04.03]The area of the Federal Reserve having the greatest impact on the changes to the money supply of our economy is:

Board of Governors.

Member Banks.

Federal Open Market Committee.

Federal Reserve Regional Bank.

Question 12 

[04.03]The Federal Reserve utilizes monetary policy to

determine members of the Board of Governors.

impact the money supply.

control consumers.

gain publicity.

Question 13 

[04.03]Meetings of Federal Reserve officials occur in

Boston.

New York.

Washington, D.C.

Chicago.

Question 14 

[04.02]You are a member of Congress discussing the minimum wage. Unemployment is rising out of control and applications for government assistance are at an all-time high. The public demands immediate action. To address their concerns, you should recommend

postponing the issue to see if conditions improve without intervention.

keeping the minimum wage at its current level.

lowering the minimum wage.

raising the minimum wage.

Question 15 

[04.02]

Use this image to answer the following question. When government sets a price for a good above equilibrium, there will be

economic growth.

economic loss.

a shortage.

a surplus.

Question 16 

[04.02]As of 2009, an American worker earning minimum wage

can provide comfortably for a family of four.

fails to earn a living wage for a family of four.

will lose the job when the economy slows.

is able to afford a new car or home.

Question 17 

[04.02]

In the diagram above, what will happen if the government sets the minimum wage at point A?

The minimum wage will rise to meet equilibrium.

The minimum wage will fall to meet equilibrium.

There will be a surplus of workers.

There will be a shortage of workers.

Question 18 

[04.05]You are a representative to the U.S. Congress. The U.S. federal budget debt grew by one billion dollars each of the last five years. To correct this, you should support the budget that

increases spending for health care, education, and defense.

decrease spending and/or increase income taxes to eliminate the deficit.

decreases corporate taxes in the health industry.

decreases income taxes to eliminate the surplus.

Question 19 

[04.05]Attempts to reduce the federal deficit and debt are usually unpopular with many Americans because they

must either pay more in taxes or receive reduced benefits.

assume these efforts will increase unemployment.

expect employment salary scales to decrease.

believe such attempts are corrupt.

Question 20 

[04.05]Americans that support a balanced budget amendment believe it will

stabilize the economy.

end American greed.

help other countries.

end American poverty.

Question 21 

[04.05]To correct a federal budget surplus, Congress may

eliminate employees.

reduce programs.

raise taxes.

increase spending.

Question 22 

[04.01]

Use this image to answer the following question. In the business cycle phase marked C, economists expect the

government to act to encourage economic growth.

government to act to slow economic growth.

inflation rate to start dropping dramatically.

unemployment rate to begin rising dramatically.

Question 23 

[04.01]The inflation rate is decreasing and unemployment is rising. The economy is likely in

recession.

expansion.

a peak.

a trough.

Question 24 

[04.01]Which stage of the business cycle has the highest inflation rate?

expansion

peak

contraction

trough

Question 25 

[04.01]

Use this image to answer the following question. In the business cycle phase marked D, economists expect the

inflation rate to begin dropping.

unemployment rate to start falling.

consumer sales rate to decrease.

banks to seek government aid.

Question 26 

[04.01]Stagflation is a combination of

high unemployment and low inflation.

high unemployment and high inflation.

low unemployment and high inflation.

low unemployment and low inflation.

Question 27 

[04.04]Unemployment is low and inflation is rising, but slowly. Gross Domestic Product is also rising. The Federal Reserve may increase the reserve requirement at this point in order to

ensure that the growth continues at a brisk pace.

raise unemployment to levels that indicate a mobile workforce.

protect the public from the potential of inflation rising out of control.

encourage banks to give out more loans, fostering further economic growth.

Question 28 

[04.04]

Use this image to answer the following question. When the economy is operating at point B, the Federal Reserve is most likely to follow

expansionary fiscal policy.

contractionary fiscal policy.

expansionary monetary policy.

contractionary monetary policy.

Question 29 

[04.04]Which of the following is not a tool of monetary policy?

tax law

discount rate

reserve requirement

open market operations

Question 30 

[04.04]Lowering the discount rate can promote full employment because

employees are more likely to apply for multiple jobs.

employees are able to get better offers for hourly wages.

companies are more likely to expand and hire more workers.

companies are less likely to sign up employees for unemployment insurance.

Question 31 

[04.04]Respond to the following question in at least a complete paragraph of three to five sentences.

Imagine this scenario. Inflation is steady, but unemployment is on the rise. Many people are worried that further job loss could lead to bigger problems. Discuss an example of how the Federal Reserve may use a tool of monetary policy in this situation and explain the goals of using the tool.