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Fannie Mae and Freddie Mac held a competitive advantage over other mortgage lenders primarily because
a. they were established as non-profit entities and thus did not need to show that they were profitable.
b. they were exempt from federal regulations monitoring lending practices.
c. they could borrow funds cheaper than other lenders because their bonds were perceived to be backed by the federal government.
d. they were allowed to institute higher loan standards than other banks and mortgage lenders.
Which of the following describes the relationship between interest rates and interest-sensitive goods, such as housing?
a. As interest rates decline, the demand for interest-sensitive goods increases.
b. As interest rates increase, the demand for interest-sensitive goods decreases, driving prices upward.
c. As interest rates decline, the demand for interest-sensitive goods decreases.
d. As interest rates increase, the demand for interest-sensitive goods increases, driving prices upward.
Which of the following is most likely to result from a rising household debt/income ratio?
a. Household income will rise rapidly.
b. A larger share of household income will be required to meet interest payments on debt.
c. Household consumption will fall as a share of income.
d. Households will be in a better position to deal with unexpected events that force major adjustments.
Sound economic policy is policy that is consistent with
a. good intentions.
b. saving jobs, protecting domestic industry, and increasing tax revenue.
c. quick action and frequent policy changes until positive results are achieved.
d. monetary stability, free trade, and low tax rates.
If fiscal policy were able to exert a significant impact on the economy during the Great Depression, we would expect
a. an increase in government expenditures and a reduction in budget deficits.
b. a decrease in government expenditures and an increase in budget deficits.
c. an increase in government expenditures and an increase in budget deficits.
d. a decrease in government expenditures and a reduction in budget deficits.
Which of the following resulted from the Smoot-Hawley trade bill of 1930?
a. The stock market began a steady recovery from the crash of October 1929.
b. The unemployment rate, which had been rising, began to steadily decline as jobs were protected by the trade restrictions.
c. Many countries responded by imposing higher tariffs on American products, and the volume of international trade fell sharply.
d. Imports decreased, while exports increased, resulting in an overall increase in GDP and tariff revenues.
Which of the following is an important lesson that can be drawn from the experience of the Great Depression?
a. Frequent shifts in monetary policy can help smooth out unstable economic conditions during a recession.
b. The federal government should always balance its budget during a recession.
c. Trade restrictions can "save jobs" and expand total employment during an economic downturn.
d. The good intentions of political decision-makers are no substitute for sound policy.
The Phillips curve illustrates the relationship between
a. change in the money supply and change in unemployment.
b. inflation and unemployment.
c. tax rates and tax revenues.
d.the equilibrium level of income and the employment rate.
The variables in the index of leading indicators are included in the index because
a. they turn down prior to a deflation and turn up prior to an inflation.
b. they provide a comprehensive measure of the current state of the economy.
c. they generally lag behind turns in the business cycle.
d. they turn down prior to a recession and turn up before the beginning of a business expansion.
Which of the following contributed to the weak recovery from the 2008-2009 recession?
a. The restrictive monetary policy followed by the Fed.
b. The budget deficits were too small to exert much impact on aggregate demand, output, and employment.
c. Government spending was increased by only a small amount.
d. The temporary nature of the tax rebates and spending increases created uncertainty and exerted only a weak impact on aggregate demand.
Private investment as a share of the economy tends to be higher in countries
a. with low levels of economic freedom.
b. that have experienced a sharp reduction in economic freedom during the most recent decade. c. with high levels of economic freedom.d.with economic freedom ratings near zero.
In order to achieve a high economic freedom rating, a country must
a. provide secure protection of privately owned property and evenhanded enforcement of contracts.
b. rely more fully on markets rather than governments to allocate goods and resources. c. refrain from creating barriers that limit domestic and international trade.
d. all of the above.
a. reduce output, income, and the general living standard of the populace.
b. encourage domestic business firms to expand output so they can achieve larger gains from the adoption of mass production techniques.
c. help people achieve higher income levels.
d. help promote high rates of economic growth.
The highest valued alternative that must be given up in order to choose an action is called its
a. opportunity cost.
b. ceteris paribus.
Patents have which of the following effects
a. They raise prices of protected goods, they provide incentives, and they let patent holders sue new innovators.
b. They lower prices of protected goods, they provide incentives, and they let patent holders sue new innovators.
c. They raise prices of protected goods, they provide incentives, and they let patent holders sue new innovators.
d. They lower prices of protected goods, they provide incentives, and they prevent new innovators from being sued by earlier innovators.
Which of the following countries has had the highest growth rate of per capita GDP over the past 25 years?
a. South Korea
d. United States
If a nation is going to achieve and sustain a high rate of economic growth, it must
a. prohibit low-wage foreign producers from supplying goods to the domestic market.
b. impose regulations that will limit the intensity of competition among domestic firms.
c. have an abundant domestic supply of low cost energy resources.
d. have a mechanism capable of attracting savings and channeling them into wealth-creating projects.
If real GDP is increasing more rapidly than population,
a. population must be declining.
b. per capita real GDP will be increasing. c. the country will have to export more than it imports.
d.the general level of prices must be increasing.
The major sources of economic growth are
a. gains from trade, entrepreneurial discovery, and investment.
b. free and open elections and politicians who are willing to place the general welfare of the populace above their political ambitions.
c. high taxes, an expansion in the size of government, and restrictions on investments by foreigners.
d. rapid expansion in the supply of money, trade restrictions, and government licensing of business activities.
If inventory investment during a year was minus $6 billion, producers must have
a. produced only $6 billion of new capital assets during the year.
b. produced new capital assets that exceeded the depreciation allowance by $6 billion.
c. sold $6 billion more goods and services during the year than they produced.
d. added goods valued at $6 billion to their stock of unsold goods and raw materials.
The change in the aggregate quantity of goods and services demanded in the U.S. is based on the logic that as the price level falls,
a. real wealth falls, interest rates rise, and net exports fall.
b. real wealth rises, interest rates fall, and net exports rise.
c. real wealth falls, interest rates rise, and net exports rise.
d. real wealth rises, interest rates fall, and net exports fall.
Which of the following would cause prices to rise and real GDP to fall in the short run?
a. an increase in the expected price level b. an increase in the quantity of labor available c. an increase in the capital stock
d. All of the above are correct.
In a world where capital moves rapidly across national boundaries, if a larger budget deficit leads to higher real interest rates,
a. there will be an inflow of foreign capital, which will cause the dollar to appreciate and net exports to decline.
b. there will be an outflow of foreign capital, which will cause the dollar to appreciate and net exports to decline.
c. there will be an outflow of foreign capital, which will cause the dollar to depreciate and net exports to increase.
d. there will be an inflow of foreign capital, which will cause the dollar to depreciate and net exports to increase.
In the movie Economic Freedom in Action we learned that
a. Croatia went from a developed country to an undeveloped country, Chile grew when it adopted democracy, and North Korea is a horrible place.
b. Zambia went from a developed country to an undeveloped country, Chile grew when it adopted democracy, and North Korea is a horrible place.
c. Croatia went from an undeveloped country to a developed country, Chile grew when it adopted free markets, and North Korea is a horrible place.
d.Croatia went from an undeveloped country to a developed country, Zambia grew when it adopted communitarianism, and North Korea is a horrible place
According to the rational expectations theory,
a. on average people have very little idea of what to expect from government policy makers.
b. people form expectations, in part, by considering the probable future effects of changes in government policy.
c. people form expectations by focusing only on the private sector.
d. people do not consider likely government policies when forming expectations.
Capital Markets serve to
a. Help people in food deserts including poorer sections of cities such as state capital Philadelphia get fresh healthy food.
b. Let people buy and sell old equipment so that the highest value user gets the equipment.
c. Put borrowers and lenders together.
d. all of the above
Since the mid-1980s, the overall Economic Freedom of the World (EFW) ratings of most countries have been increasing due to
a.more stable monetary policies.
c.lower tax rates.
d.All of the above.
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