ECO 2013 UCF Exam 3 Actual Study
Questions with Accurate Answers
1. The table shows the amounts held as the various components of M1 and M2.
The value of M1 is $_______ billion.
The value of M2 is $_______ billion. - ANSWER A. M1 and M2; are
220; 1100
2. The functions of depository institutions include _______.
A. providing debt counseling
B. providing credit ratings
C. implementing monetary policy
D. lowering the cost of monitoring borrowers - ANSWER D. lowering
the cost of monitoring borrowers
3. What is the distinction between automatic and discretionary fiscal policy?
Automatic fiscal policy is ______. Discretionary fiscal policy is ______ .
A. triggered by the state of the economy with no action by government;
initiated by an act of Congress
B. the multiplier effect that follows an increase in government
expenditure; initiated by the President of the United States
C. the multiplier effect that follows an increase in government
expenditure; initiated by an act of Congress
D. triggered by the state of the economy with no action by government;
initiated by the President of the United States - ANSWER A.
triggered by the state of the economy with no action by government;
initiated by an act of Congress
,4. It is unlikely that the United States is on the "wrong" side of this curve
because, if it were, a decrease in the tax rate would ______ .
A. decrease tax revenue
B. bring a budget surplus
C. bring a budget deficit
D. increase tax revenue - ANSWER A. tax rate; amount of tax revenue
collected
E. increase tax revenue
5. M1 consists of currency held by _____ and _____, _____, and _____ owned
by individuals and businesses.
A. government; businesses; savings; credit cards
B. individuals; businesses; traveler's checks; checkable deposits
C. the Fed; commercial banks; stocks; bonds
D. businesses; commercial banks; traveler's checks; bonds - ANSWER
B. individuals; businesses; traveler's checks; checkable deposits
6. In performing which of its primary functions does money solve the problem
of the double coincidence of wants?
A. medium of exchange
B. money supply
C. unit of account
D. store of value
E. barter system - ANSWER A. medium of exchange
7. Sara withdraws $1,000 from her savings account at the Lucky S&L, keeps
$50 in cash, and deposits the balance in her checking account at the Bank of
Illinois.
What is the immediate change in M1 and M2?
The immediate change is ______ in M1 of $1,000 and ______ in M2.
, A. an increase; an increase
B. a decrease; a decrease
C. an increase; no change
D. a decrease; no change - ANSWER C. an increase; no change
8. Money serves as a ______.
A. store of value, which is a function unique to money
B. store of value because even during a period of inflation its value does
not change
C. medium of exchange, which means that it is generally accepted in
exchange for goods and services
D. unit of account, which means that it can be held and exchanged later
for goods and services - ANSWER C. medium of exchange, which
means that it is generally accepted in exchange for goods and services
9. The unit of account is defined as
A. the medium of exchange.
B. an agreed upon measure for stating prices of goods and services.
C. an object that is accepted in return for goods and services.
D. the exchange of goods and services directly for other goods and
services.
E. barter. - ANSWER B. an agreed upon measure for stating prices of
goods and services.
10.Hyperinflation - ANSWER Inflation exceeding 50% per month
11.Demand for labor - ANSWER an employer’s maximum willingness to pay
is output generated by an additional unit of labor
12.Supply of labor - ANSWER Employees minimum willingness to accept is
the opportunity cost of foregone leisure or their next best employment
opportunity
Questions with Accurate Answers
1. The table shows the amounts held as the various components of M1 and M2.
The value of M1 is $_______ billion.
The value of M2 is $_______ billion. - ANSWER A. M1 and M2; are
220; 1100
2. The functions of depository institutions include _______.
A. providing debt counseling
B. providing credit ratings
C. implementing monetary policy
D. lowering the cost of monitoring borrowers - ANSWER D. lowering
the cost of monitoring borrowers
3. What is the distinction between automatic and discretionary fiscal policy?
Automatic fiscal policy is ______. Discretionary fiscal policy is ______ .
A. triggered by the state of the economy with no action by government;
initiated by an act of Congress
B. the multiplier effect that follows an increase in government
expenditure; initiated by the President of the United States
C. the multiplier effect that follows an increase in government
expenditure; initiated by an act of Congress
D. triggered by the state of the economy with no action by government;
initiated by the President of the United States - ANSWER A.
triggered by the state of the economy with no action by government;
initiated by an act of Congress
,4. It is unlikely that the United States is on the "wrong" side of this curve
because, if it were, a decrease in the tax rate would ______ .
A. decrease tax revenue
B. bring a budget surplus
C. bring a budget deficit
D. increase tax revenue - ANSWER A. tax rate; amount of tax revenue
collected
E. increase tax revenue
5. M1 consists of currency held by _____ and _____, _____, and _____ owned
by individuals and businesses.
A. government; businesses; savings; credit cards
B. individuals; businesses; traveler's checks; checkable deposits
C. the Fed; commercial banks; stocks; bonds
D. businesses; commercial banks; traveler's checks; bonds - ANSWER
B. individuals; businesses; traveler's checks; checkable deposits
6. In performing which of its primary functions does money solve the problem
of the double coincidence of wants?
A. medium of exchange
B. money supply
C. unit of account
D. store of value
E. barter system - ANSWER A. medium of exchange
7. Sara withdraws $1,000 from her savings account at the Lucky S&L, keeps
$50 in cash, and deposits the balance in her checking account at the Bank of
Illinois.
What is the immediate change in M1 and M2?
The immediate change is ______ in M1 of $1,000 and ______ in M2.
, A. an increase; an increase
B. a decrease; a decrease
C. an increase; no change
D. a decrease; no change - ANSWER C. an increase; no change
8. Money serves as a ______.
A. store of value, which is a function unique to money
B. store of value because even during a period of inflation its value does
not change
C. medium of exchange, which means that it is generally accepted in
exchange for goods and services
D. unit of account, which means that it can be held and exchanged later
for goods and services - ANSWER C. medium of exchange, which
means that it is generally accepted in exchange for goods and services
9. The unit of account is defined as
A. the medium of exchange.
B. an agreed upon measure for stating prices of goods and services.
C. an object that is accepted in return for goods and services.
D. the exchange of goods and services directly for other goods and
services.
E. barter. - ANSWER B. an agreed upon measure for stating prices of
goods and services.
10.Hyperinflation - ANSWER Inflation exceeding 50% per month
11.Demand for labor - ANSWER an employer’s maximum willingness to pay
is output generated by an additional unit of labor
12.Supply of labor - ANSWER Employees minimum willingness to accept is
the opportunity cost of foregone leisure or their next best employment
opportunity
