1.Why is it in the best interest of the government to regulate natural monopolies? (4 points) To allow multiple suppliers access to the market To gain a share of the profits of the monopoly To keep costs to a minimum for consumers To prevent surplus goods and services
2.What is the main function of the Federal Open Market Committee? (4 points) Extend loans to consumers. Oversee administration of financial regulations. Set monetary policy to promote economic growth. Write laws governing finance and trade.
3. If the economy is in decline, and the Federal Reserve wants to encourage banks to lend to consumers, which step will the Fed likely take? (4 points) Encourage the sale of government securities. Decrease the discount rate. Increase the federal funds rate. Raise the prime rate.
4. The country has entered a period of economic growth, but prices are rising too rapidly. To stabilize prices, the Federal Reserve decides to (4 points) decrease the federal funds rate decrease the reserve requirement raise the discount rate buy more government securities
5. Which of the following fiscal policies would mostly likely reduce unemployment? (4 points) Increasing funding for local grants Lowering reserve requirements Raising taxes on small business Selling more government securities
6. Imagine the federal government has a national debt of $10.2 trillion. Congress’s budget for the coming year includes a spending projection of $4.2 billion. Tax revenue projects $3.8 billion. Which fiscal policy would Congress have to adopt to maintain spending levels without increasing the debt? (4 points) Cut public programs Increase taxes Lower discount rates Reduce open-market operations
7. A factory lays off workers during a recession. Which of the following would most likely feel a negative externality? (4 points) Competing businesses Factory workers Factory owners Neighboring businesses
8. A free-trade agreement lowers restrictions on trucking across international borders. Which of the following would be a negative externality for the local environment? (4 points) Higher costs for domestic goods Fewer imports of renewable resources More water consumption An increase in air pollution
9. The federal government approves additional funding for food resources in Africa. Which of the following would be a potential negative externality for the global environment? (4 points) Demands on food resources in Africa increase. Incidents of starvation-related illnesses decrease. Local economies benefit from increasing number of aid workers. Other countries follow suit and shift funds from conservation to food.
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