Question 1

Which of these is an example of microeconomic analysis?&#10;A) Analysis of the Fed's interest rate policy&#10;B) Examination of governmental spending behavior&#10;C) The study of the market for automobiles&#10;D) Forecasting the future dollar-euro exchange rate

Accepted Answer

Microeconomic analysis focuses on the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. The study of the market for automobiles is an example of microeconomic analysis because it involves examining the supply and demand for cars, pricing, consumer preferences, and competition among car manufacturers, all of which are microeconomic issues.

Question 2

Which of these is an example of macroeconomic analysis?&#10;A) The forecasting of future inflation rates&#10;B) Analysis of the housing market&#10;C) Study of the price of airlines tickets&#10;D) Analysis of the price of pharmaceutical goods

Accepted Answer

Macroeconomic analysis involves the study of economy-wide phenomena, such as inflation rates, rather than the study of individual markets or sectors.

Question 3

Which of the following is not a pillar of the macroeconomy?&#10;A) Monetary Policy&#10;B) Fiscal Policy&#10;C) Exchange Rates&#10;D) Confidence

Accepted Answer

Exchange rates, while important in the macroeconomic context, especially for international trade and investment, are not considered a foundational pillar of the macroeconomy in the same way as monetary policy, fiscal policy, and confidence. The three pillars directly influence the overall economic environment through government and central bank actions, whereas exchange rates are more of a consequence of these policies and other factors.

Question 4

Monetary Policy is:&#10;A) The adjustment of money supply&#10;B) The appointment of the Fed Chair&#10;C) The amount of spending done by the government&#10;D) The setting of mortgage interest rates

Accepted Answer

Monetary policy involves the management of the money supply and interest rates by central banks (like the Federal Reserve in the United States) to control inflation, manage employment levels, and stabilize the currency.

Question 5

Which is not a part of fiscal policy?&#10;A) Capital Gains Taxes&#10;B) Government Spending&#10;C) Interest Rates&#10;D) Income Taxes

Accepted Answer

Interest rates are not a part of fiscal policy; they are part of monetary policy, which is managed by a country's central bank (e.g., the Federal Reserve in the United States) to control the money supply and influence the economy. Fiscal policy involves government spending and taxation decisions made by the government.

Question 6

What is a government's primary source of revenue?&#10;A) Government bonds&#10;B) Tax Revenue&#10;C) Printed Money&#10;D) Loans from the private sector

Accepted Answer

Tax revenue is the primary source of income for a government, as it collects taxes from individuals and businesses to fund public services and infrastructure.

Question 7

Which is a part of US GDP?&#10;A) The purchase of a new pair of Levi jeans by an American consumer&#10;B) The purchase of a Mercedes car from a plant in Germany&#10;C) The import of cheese produced in France&#10;D) The purchase of silk garments manufactured in India

Accepted Answer

Gross Domestic Product (GDP) measures the value of all final goods and services produced within a country's borders in a given period. The purchase of a new pair of Levi jeans by an American consumer is a transaction that contributes to the US GDP because it represents consumption of goods produced within the United States. Choices B, C, and D involve products produced outside the US and therefore do not contribute to US GDP; instead, they are considered imports.

Question 8

Which of these best describes crowding out?&#10;A) The lack of funds for private sector investment&#10;B) High interest rates caused by governmental fiscal policy&#10;C) The lack of resources such as employment available to the private sector due to governmental policy&#10;D) New laws passed by the government that impacts private firms

Accepted Answer

Crowding out occurs when government borrowing drives up interest rates, making it more expensive for businesses to borrow money and invest.

Deck 1: Confidence, Monetary Policy, and Fiscal Policy