1. The largest source of tax revenue for the federal government is:
a. the personal income tax
b. the social security tax
c. the property tax
d. the sales tax
2. When my income was $100,000, I paid $10,000 in taxes. When my income became $200,000, I paid $40,000 in taxes. My marginal tax rate is:
a. 10%
b. 20%
c. 30%
d. 40%
3. The tax is question #2 is:
a. progressive
b. regressive
c. proportional
4. Which of the following taxes is regressive?
a. the federal income tax
b. the state income tax
c. the sales tax
d. the Medicare tax
5. Assume that there are two goods, A and B. In 1996, Americans produced 10 units of A at a price of $10 and 20 units of B at a price of $20. In 2002, Americans produced 20 units of A at a price of $20 and 30 units of B at a price of $30. The Nominal GDP for 2002 is:
a. $100
b. $400
c. $500
d. $900
e. $1300
6. Using the numbers in question 5, the Real GDP for 2002 is:
a. $400 b. $500 c. $800 d. $900 e. $1,300
7. Which of the following statements is/are true?
a. Business Investment Spending occurs when individuals buy stock in the stock market
b. Productivity is the United States grew very slowly between 1973 and 1996
c. Because of discouraged workers, the official unemployment rate is too high
d. “Full employment” occurs when there is no frictional unemployment
8. Immediately after a trough, we would expect to have a/an
a. peak
b. recession
c. recovery
d. another trough
9. Last week, Martha spent one day cleaning a house. For this, she was paid $50. The rest of the week, she spent looking for a job. Martha would be classified as
a. employed
b. unemployed
c. not in the labor force
10. John lost his accounting job when Montgomery Wards closed its stores in San Diego. He looked for a similar job for ten months before finding an accounting job at Sears. During the month John was unemployed, he was
a. frictionally unemployed
b. seasonally unemployed
c. cyclically unemployed
d. structurally unemployed
Answers: A C A C E C B C A D
11. Which of the following IS a function of money?
a. medium of exchange
b. store of value
c. unit of accounting
d. all of the above
12. Which of the following is a component of M-1?
a. savings deposits
b. credit card
c. checkable deposits
d. gold
13. Which of the following is a NOT component of M-2?
a. small time deposits
b. money market mutual funds
c. stocks
d. checkable deposits
14. Which of the following is true about the Federal Reserve System (Fed)?
a. it is a system of 12 central banks
b. its Board of Governors is elected by a vote of the people
c. its main policy-making body is the FDIC
d. it accepts deposits from the public and makes loans to businesses
e. all of the above
15. An IOU of the Federal Reserve Bank of San Francisco to Bank of America is called:
a. discounts
b. federal funds
c. reserves
d. collateral
16. Which of the following is the most liquid?
a. a savings account
b. a 6 month CD
c. a home
d. water
17. The monetary base is composed of:
a. gold and silver
b. currency only
c. currency and reserves
d. currency and checkable deposits
18. If the monetary base is increased by $1,000 and the reserve requirement is 10% (1/10), by how much will the money supply be increased?
a. $100
b. $1,000
c. $5,000
d. $10,000
19. If the Federal Reserve wishes to increase the money supply, it should:
a. raise the reserve requirement
b. raise the discount rate
c. buy Treasury securities in the open market
d. all of the above
20. An increase in the money supply will cause interest rates to
a. rise
b. fall
c. remain unchanged
Answers: D C C A C A C D C B